Correlation Between CVS Health and Takkt AG

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Can any of the company-specific risk be diversified away by investing in both CVS Health and Takkt AG 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 Takkt AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Takkt AG, you can compare the effects of market volatilities on CVS Health and Takkt AG 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 Takkt AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Takkt AG.

Diversification Opportunities for CVS Health and Takkt AG

0.1
  Correlation Coefficient

Average diversification

The 3 months correlation between CVS and Takkt is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Takkt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takkt AG 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 Takkt AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takkt AG has no effect on the direction of CVS Health i.e., CVS Health and Takkt AG go up and down completely randomly.

Pair Corralation between CVS Health and Takkt AG

Assuming the 90 days trading horizon CVS Health is expected to generate 2.8 times more return on investment than Takkt AG. However, CVS Health is 2.8 times more volatile than Takkt AG. It trades about 0.12 of its potential returns per unit of risk. Takkt AG is currently generating about -0.36 per unit of risk. If you would invest  5,049  in CVS Health on September 5, 2024 and sell it today you would earn a total of  478.00  from holding CVS Health or generate 9.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CVS Health  vs.  Takkt AG

 Performance 
       Timeline  
CVS Health 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Takkt AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Takkt AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CVS Health and Takkt AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CVS Health and Takkt AG

The main advantage of trading using opposite CVS Health and Takkt AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Takkt AG 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 Takkt AG will offset losses from the drop in Takkt AG's long position.
The idea behind CVS Health and Takkt AG 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.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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