Correlation Between CVS Health and Volkswagen
Can any of the company-specific risk be diversified away by investing in both CVS Health and Volkswagen 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 Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Volkswagen AG, you can compare the effects of market volatilities on CVS Health and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Volkswagen.
Diversification Opportunities for CVS Health and Volkswagen
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and Volkswagen is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of CVS Health i.e., CVS Health and Volkswagen go up and down completely randomly.
Pair Corralation between CVS Health and Volkswagen
Assuming the 90 days trading horizon CVS Health is expected to generate 1.85 times more return on investment than Volkswagen. However, CVS Health is 1.85 times more volatile than Volkswagen AG. It trades about 0.09 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.29 per unit of risk. If you would invest 5,301 in CVS Health on August 29, 2024 and sell it today you would earn a total of 359.00 from holding CVS Health or generate 6.77% 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. Volkswagen AG
Performance |
| Timeline |
| CVS Health |
| Volkswagen AG |
CVS Health and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Volkswagen
The main advantage of trading using opposite CVS Health and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| CVS Health vs. Apple Inc | CVS Health vs. Apple Inc | CVS Health vs. Superior Plus Corp | CVS Health vs. SIVERS SEMICONDUCTORS AB |
| Volkswagen vs. Goodyear Tire Rubber | Volkswagen vs. AXWAY SOFTWARE EO | Volkswagen vs. Sqs Software Quality | Volkswagen vs. Compagnie Plastic Omnium |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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