Correlation Between CVS Health and EBay
Can any of the company-specific risk be diversified away by investing in both CVS Health and EBay 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 EBay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and eBay Inc, you can compare the effects of market volatilities on CVS Health and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and EBay.
Diversification Opportunities for CVS Health and EBay
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and EBay is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of CVS Health i.e., CVS Health and EBay go up and down completely randomly.
Pair Corralation between CVS Health and EBay
Assuming the 90 days trading horizon CVS Health is expected to generate 2.54 times less return on investment than EBay. In addition to that, CVS Health is 1.33 times more volatile than eBay Inc. It trades about 0.04 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.15 per unit of volatility. If you would invest 96,157 in eBay Inc on September 5, 2024 and sell it today you would earn a total of 32,266 from holding eBay Inc or generate 33.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. eBay Inc
Performance |
| Timeline |
| CVS Health |
| eBay Inc |
CVS Health and EBay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and EBay
The main advantage of trading using opposite CVS Health and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.| CVS Health vs. The Select Sector | CVS Health vs. Promotora y Operadora | CVS Health vs. SPDR Series Trust | CVS Health vs. Vanguard World |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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