Correlation Between CVS Health and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both CVS Health and AstraZeneca PLC 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 AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and AstraZeneca PLC, you can compare the effects of market volatilities on CVS Health and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and AstraZeneca PLC.
Diversification Opportunities for CVS Health and AstraZeneca PLC
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and AstraZeneca is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of CVS Health i.e., CVS Health and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between CVS Health and AstraZeneca PLC
Assuming the 90 days trading horizon CVS Health is expected to generate 0.99 times more return on investment than AstraZeneca PLC. However, CVS Health is 1.01 times less risky than AstraZeneca PLC. It trades about 0.04 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.14 per unit of risk. If you would invest 115,702 in CVS Health on September 4, 2024 and sell it today you would earn a total of 4,898 from holding CVS Health or generate 4.23% 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. AstraZeneca PLC
Performance |
| Timeline |
| CVS Health |
| AstraZeneca PLC |
CVS Health and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and AstraZeneca PLC
The main advantage of trading using opposite CVS Health and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| CVS Health vs. Samsung Electronics Co | CVS Health vs. First Republic Bank | CVS Health vs. Verizon Communications | CVS Health vs. First Majestic Silver |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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