Correlation Between CVS Health and Amazon
Can any of the company-specific risk be diversified away by investing in both CVS Health and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Amazon Inc, you can compare the effects of market volatilities on CVS Health and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Amazon.
Diversification Opportunities for CVS Health and Amazon
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and Amazon is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of CVS Health i.e., CVS Health and Amazon go up and down completely randomly.
Pair Corralation between CVS Health and Amazon
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Amazon. In addition to that, CVS Health is 1.37 times more volatile than Amazon Inc. It trades about -0.02 of its total potential returns per unit of risk. Amazon Inc is currently generating about 0.14 per unit of volatility. If you would invest 262,290 in Amazon Inc on September 14, 2024 and sell it today you would earn a total of 200,448 from holding Amazon Inc or generate 76.42% 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. Amazon Inc
Performance |
| Timeline |
| CVS Health |
| Amazon Inc |
CVS Health and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Amazon
The main advantage of trading using opposite CVS Health and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| CVS Health vs. Micron Technology | CVS Health vs. Deutsche Bank Aktiengesellschaft | CVS Health vs. McEwen Mining | CVS Health vs. Lloyds Banking Group |
| Amazon vs. Prudential Financial | Amazon vs. Monster Beverage Corp | Amazon vs. Hoteles City Express | Amazon vs. Samsung Electronics Co |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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