Correlation Between CVS Health and Wayside Technology
Can any of the company-specific risk be diversified away by investing in both CVS Health and Wayside Technology 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 Wayside Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Wayside Technology Group, you can compare the effects of market volatilities on CVS Health and Wayside Technology 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 Wayside Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Wayside Technology.
Diversification Opportunities for CVS Health and Wayside Technology
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and Wayside is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of CVS Health i.e., CVS Health and Wayside Technology go up and down completely randomly.
Pair Corralation between CVS Health and Wayside Technology
Assuming the 90 days trading horizon CVS Health is expected to generate 11.45 times less return on investment than Wayside Technology. But when comparing it to its historical volatility, CVS Health is 1.12 times less risky than Wayside Technology. It trades about 0.03 of its potential returns per unit of risk. Wayside Technology Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 7,839 in Wayside Technology Group on September 12, 2024 and sell it today you would earn a total of 4,961 from holding Wayside Technology Group or generate 63.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Wayside Technology Group
Performance |
| Timeline |
| CVS Health |
| Wayside Technology |
CVS Health and Wayside Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Wayside Technology
The main advantage of trading using opposite CVS Health and Wayside Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Wayside Technology 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 Wayside Technology will offset losses from the drop in Wayside Technology's long position.The idea behind CVS Health and Wayside Technology Group 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.| Wayside Technology vs. QURATE RETAIL INC | Wayside Technology vs. JAPAN TOBACCO UNSPADR12 | Wayside Technology vs. MARKET VECTR RETAIL | Wayside Technology vs. China Resources Beer |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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