Correlation Between CVS Health and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both CVS Health and Insteel Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CVS Health and Insteel Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Insteel Industries, you can compare the effects of market volatilities on CVS Health and Insteel Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CVS Health with a short position of Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Insteel Industries.
Diversification Opportunities for CVS Health and Insteel Industries
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CVS and Insteel is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries and CVS Health is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CVS Health are associated (or correlated) with Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of CVS Health i.e., CVS Health and Insteel Industries go up and down completely randomly.
Pair Corralation between CVS Health and Insteel Industries
Assuming the 90 days trading horizon CVS Health is expected to generate 2.92 times less return on investment than Insteel Industries. In addition to that, CVS Health is 1.39 times more volatile than Insteel Industries. It trades about 0.05 of its total potential returns per unit of risk. Insteel Industries is currently generating about 0.19 per unit of volatility. If you would invest 2,480 in Insteel Industries on August 24, 2024 and sell it today you would earn a total of 280.00 from holding Insteel Industries or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
CVS Health vs. Insteel Industries
Performance |
| Timeline |
| CVS Health |
| Insteel Industries |
CVS Health and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Insteel Industries
The main advantage of trading using opposite CVS Health and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Insteel Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Insteel Industries will offset losses from the drop in Insteel Industries' long position.The idea behind CVS Health and Insteel Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Insteel Industries vs. Cleanaway Waste Management | Insteel Industries vs. Platinum Investment Management | Insteel Industries vs. Check Point Software | Insteel Industries vs. Constellation Software |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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