Correlation Between CVS Health and Element Solutions
Can any of the company-specific risk be diversified away by investing in both CVS Health and Element Solutions 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 Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Element Solutions, you can compare the effects of market volatilities on CVS Health and Element Solutions 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 Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Element Solutions.
Diversification Opportunities for CVS Health and Element Solutions
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and Element is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions 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 Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of CVS Health i.e., CVS Health and Element Solutions go up and down completely randomly.
Pair Corralation between CVS Health and Element Solutions
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Element Solutions. In addition to that, CVS Health is 1.76 times more volatile than Element Solutions. It trades about -0.4 of its total potential returns per unit of risk. Element Solutions is currently generating about -0.29 per unit of volatility. If you would invest 2,692 in Element Solutions on September 22, 2024 and sell it today you would lose (252.00) from holding Element Solutions or give up 9.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Element Solutions
Performance |
| Timeline |
| CVS Health |
| Element Solutions |
CVS Health and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Element Solutions
The main advantage of trading using opposite CVS Health and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| CVS Health vs. Gol Intelligent Airlines | CVS Health vs. BlueScope Steel Limited | CVS Health vs. RELIANCE STEEL AL | CVS Health vs. American Airlines Group |
| Element Solutions vs. CVS Health | Element Solutions vs. Sabra Health Care | Element Solutions vs. Bumrungrad Hospital Public | Element Solutions vs. Datalogic SpA |
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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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