Correlation Between CVS Health and WATSCO INC

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both CVS Health and WATSCO INC 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 WATSCO INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and WATSCO INC B, you can compare the effects of market volatilities on CVS Health and WATSCO INC 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 WATSCO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and WATSCO INC.

Diversification Opportunities for CVS Health and WATSCO INC

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between CVS and WATSCO is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and WATSCO INC B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WATSCO INC B 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 WATSCO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WATSCO INC B has no effect on the direction of CVS Health i.e., CVS Health and WATSCO INC go up and down completely randomly.

Pair Corralation between CVS Health and WATSCO INC

Assuming the 90 days trading horizon CVS Health is expected to generate 1.55 times more return on investment than WATSCO INC. However, CVS Health is 1.55 times more volatile than WATSCO INC B. It trades about 0.07 of its potential returns per unit of risk. WATSCO INC B is currently generating about 0.01 per unit of risk. If you would invest  5,149  in CVS Health on September 3, 2024 and sell it today you would earn a total of  506.00  from holding CVS Health or generate 9.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.46%
ValuesDaily Returns

CVS Health  vs.  WATSCO INC B

 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 fragile basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.
WATSCO INC B 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days WATSCO INC B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WATSCO INC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CVS Health and WATSCO INC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CVS Health and WATSCO INC

The main advantage of trading using opposite CVS Health and WATSCO INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, WATSCO INC 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 WATSCO INC will offset losses from the drop in WATSCO INC's long position.
CVS Health vs. GFL ENVIRONM
CVS Health vs. Reliance Steel Aluminum
CVS Health vs. Chunghwa Telecom Co
CVS Health vs. BlueScope Steel Limited
The idea behind CVS Health and WATSCO INC B 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.
WATSCO INC vs. Apollo Medical Holdings
WATSCO INC vs. AVITA Medical
WATSCO INC vs. CVS Health
WATSCO INC vs. ScanSource
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

Other Complementary Tools

Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Stocks Directory
Find actively traded stocks across global markets


 
Macroaxis helps investors of all levels and skills to maximize the upside of all their holdings and minimize the risk associated with market volatility, economic swings, and company-specific events. View terms and conditions
 
Feedback Blog
Made with optimal in San Francisco
2024 Macroaxis LLC
COMMON DESTINATIONS
MAIN CATEGORIES
COMPANY