Correlation Between CVS Health and Webster Financial
Can any of the company-specific risk be diversified away by investing in both CVS Health and Webster Financial 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 Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Webster Financial, you can compare the effects of market volatilities on CVS Health and Webster Financial 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 Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Webster Financial.
Diversification Opportunities for CVS Health and Webster Financial
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CVS and Webster is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of CVS Health i.e., CVS Health and Webster Financial go up and down completely randomly.
Pair Corralation between CVS Health and Webster Financial
Assuming the 90 days trading horizon CVS Health is expected to generate 1.1 times more return on investment than Webster Financial. However, CVS Health is 1.1 times more volatile than Webster Financial. It trades about 0.55 of its potential returns per unit of risk. Webster Financial is currently generating about 0.29 per unit of risk. If you would invest 4,244 in CVS Health on October 25, 2024 and sell it today you would earn a total of 881.00 from holding CVS Health or generate 20.76% 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. Webster Financial
Performance |
| Timeline |
| CVS Health |
| Webster Financial |
CVS Health and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Webster Financial
The main advantage of trading using opposite CVS Health and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial's long position.The idea behind CVS Health and Webster Financial 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.| Webster Financial vs. Tower Semiconductor | Webster Financial vs. Fast Retailing Co | Webster Financial vs. PICKN PAY STORES | Webster Financial vs. H2O Retailing |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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