Correlation Between CVS Health and PulteGroup
Can any of the company-specific risk be diversified away by investing in both CVS Health and PulteGroup 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 PulteGroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and PulteGroup, you can compare the effects of market volatilities on CVS Health and PulteGroup 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 PulteGroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and PulteGroup.
Diversification Opportunities for CVS Health and PulteGroup
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and PulteGroup is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup 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 PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of CVS Health i.e., CVS Health and PulteGroup go up and down completely randomly.
Pair Corralation between CVS Health and PulteGroup
Assuming the 90 days trading horizon CVS Health is expected to under-perform the PulteGroup. In addition to that, CVS Health is 1.15 times more volatile than PulteGroup. It trades about -0.01 of its total potential returns per unit of risk. PulteGroup is currently generating about 0.08 per unit of volatility. If you would invest 8,943 in PulteGroup on September 5, 2024 and sell it today you would earn a total of 3,957 from holding PulteGroup or generate 44.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. PulteGroup
Performance |
| Timeline |
| CVS Health |
| PulteGroup |
CVS Health and PulteGroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and PulteGroup
The main advantage of trading using opposite CVS Health and PulteGroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, PulteGroup 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 PulteGroup will offset losses from the drop in PulteGroup's long position.| CVS Health vs. TOTAL GABON | CVS Health vs. Walgreens Boots Alliance | CVS Health vs. Peak Resources Limited |
| PulteGroup vs. Sekisui Chemical Co | PulteGroup vs. BARRATT DEVEL UNSPADR2 | PulteGroup vs. Superior Plus Corp | PulteGroup vs. NMI Holdings |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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