Correlation Between CVS Health and Westinghouse Air
Can any of the company-specific risk be diversified away by investing in both CVS Health and Westinghouse Air 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 Westinghouse Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Westinghouse Air Brake, you can compare the effects of market volatilities on CVS Health and Westinghouse Air 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 Westinghouse Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Westinghouse Air.
Diversification Opportunities for CVS Health and Westinghouse Air
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CVS and Westinghouse is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Westinghouse Air Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westinghouse Air Brake 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 Westinghouse Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westinghouse Air Brake has no effect on the direction of CVS Health i.e., CVS Health and Westinghouse Air go up and down completely randomly.
Pair Corralation between CVS Health and Westinghouse Air
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Westinghouse Air. In addition to that, CVS Health is 2.08 times more volatile than Westinghouse Air Brake. It trades about -0.04 of its total potential returns per unit of risk. Westinghouse Air Brake is currently generating about 0.09 per unit of volatility. If you would invest 18,790 in Westinghouse Air Brake on September 13, 2024 and sell it today you would earn a total of 385.00 from holding Westinghouse Air Brake or generate 2.05% 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. Westinghouse Air Brake
Performance |
| Timeline |
| CVS Health |
| Westinghouse Air Brake |
CVS Health and Westinghouse Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Westinghouse Air
The main advantage of trading using opposite CVS Health and Westinghouse Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Westinghouse Air 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 Westinghouse Air will offset losses from the drop in Westinghouse Air's long position.| CVS Health vs. STRAYER EDUCATION | CVS Health vs. LPKF Laser Electronics | CVS Health vs. Renesas Electronics | CVS Health vs. NorAm Drilling AS |
| Westinghouse Air vs. CSX Corporation | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. SIVERS SEMICONDUCTORS AB | Westinghouse Air vs. Norsk Hydro ASA |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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