Correlation Between CVS Health and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both CVS Health and Nippon Steel 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 Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Nippon Steel, you can compare the effects of market volatilities on CVS Health and Nippon Steel 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 Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Nippon Steel.
Diversification Opportunities for CVS Health and Nippon Steel
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and Nippon is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of CVS Health i.e., CVS Health and Nippon Steel go up and down completely randomly.
Pair Corralation between CVS Health and Nippon Steel
Assuming the 90 days trading horizon CVS Health is expected to generate 2.28 times more return on investment than Nippon Steel. However, CVS Health is 2.28 times more volatile than Nippon Steel. It trades about 0.05 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.09 per unit of risk. If you would invest 5,269 in CVS Health on August 24, 2024 and sell it today you would earn a total of 138.00 from holding CVS Health or generate 2.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Nippon Steel
Performance |
| Timeline |
| CVS Health |
| Nippon Steel |
CVS Health and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Nippon Steel
The main advantage of trading using opposite CVS Health and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.The idea behind CVS Health and Nippon Steel 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.| Nippon Steel vs. Perseus Mining Limited | Nippon Steel vs. NORDHEALTH AS NK | Nippon Steel vs. Diamondrock Hospitality Co | Nippon Steel vs. Bumrungrad Hospital Public |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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