Correlation Between CVS Health and EHEALTH
Can any of the company-specific risk be diversified away by investing in both CVS Health and EHEALTH 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 EHEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and EHEALTH, you can compare the effects of market volatilities on CVS Health and EHEALTH 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 EHEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and EHEALTH.
Diversification Opportunities for CVS Health and EHEALTH
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and EHEALTH is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and EHEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EHEALTH 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 EHEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EHEALTH has no effect on the direction of CVS Health i.e., CVS Health and EHEALTH go up and down completely randomly.
Pair Corralation between CVS Health and EHEALTH
Assuming the 90 days trading horizon CVS Health is expected to generate 1.1 times less return on investment than EHEALTH. But when comparing it to its historical volatility, CVS Health is 1.88 times less risky than EHEALTH. It trades about 0.03 of its potential returns per unit of risk. EHEALTH is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 511.00 in EHEALTH on September 2, 2024 and sell it today you would lose (16.00) from holding EHEALTH or give up 3.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. EHEALTH
Performance |
| Timeline |
| CVS Health |
| EHEALTH |
CVS Health and EHEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and EHEALTH
The main advantage of trading using opposite CVS Health and EHEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, EHEALTH 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 EHEALTH will offset losses from the drop in EHEALTH's long position.| CVS Health vs. INTERSHOP Communications Aktiengesellschaft | CVS Health vs. Computershare Limited | CVS Health vs. Charter Communications | CVS Health vs. KRISPY KREME DL 01 |
| EHEALTH vs. SIVERS SEMICONDUCTORS AB | EHEALTH vs. Darden Restaurants | EHEALTH vs. Reliance Steel Aluminum | EHEALTH vs. Q2M Managementberatung AG |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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