Correlation Between CVS Health and Disney
Can any of the company-specific risk be diversified away by investing in both CVS Health and Disney 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 Disney into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and The Walt Disney, you can compare the effects of market volatilities on CVS Health and Disney 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 Disney. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Disney.
Diversification Opportunities for CVS Health and Disney
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CVS and Disney is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of CVS Health i.e., CVS Health and Disney go up and down completely randomly.
Pair Corralation between CVS Health and Disney
Assuming the 90 days trading horizon CVS Health is expected to generate 1.6 times less return on investment than Disney. In addition to that, CVS Health is 1.29 times more volatile than The Walt Disney. It trades about 0.06 of its total potential returns per unit of risk. The Walt Disney is currently generating about 0.13 per unit of volatility. If you would invest 181,072 in The Walt Disney on August 31, 2024 and sell it today you would earn a total of 56,828 from holding The Walt Disney or generate 31.38% 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. The Walt Disney
Performance |
| Timeline |
| CVS Health |
| Walt Disney |
CVS Health and Disney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Disney
The main advantage of trading using opposite CVS Health and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.| CVS Health vs. The Select Sector | CVS Health vs. Promotora y Operadora | CVS Health vs. SPDR Series Trust | CVS Health vs. iShares Trust |
| Disney vs. Samsung Electronics Co | Disney vs. Verizon Communications | Disney vs. Ameriprise Financial | Disney vs. Taiwan Semiconductor Manufacturing |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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