Correlation Between CVS Health and New Oriental
Can any of the company-specific risk be diversified away by investing in both CVS Health and New Oriental 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 New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and New Oriental Education, you can compare the effects of market volatilities on CVS Health and New Oriental 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 New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and New Oriental.
Diversification Opportunities for CVS Health and New Oriental
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and New is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of CVS Health i.e., CVS Health and New Oriental go up and down completely randomly.
Pair Corralation between CVS Health and New Oriental
Assuming the 90 days trading horizon CVS Health is expected to generate 49.22 times more return on investment than New Oriental. However, CVS Health is 49.22 times more volatile than New Oriental Education. It trades about 0.13 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.22 per unit of risk. If you would invest 114,100 in CVS Health on August 31, 2024 and sell it today you would earn a total of 9,410 from holding CVS Health or generate 8.25% 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. New Oriental Education
Performance |
| Timeline |
| CVS Health |
| New Oriental Education |
CVS Health and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and New Oriental
The main advantage of trading using opposite CVS Health and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, New Oriental 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 New Oriental will offset losses from the drop in New Oriental'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 |
| New Oriental vs. The Select Sector | New Oriental vs. Promotora y Operadora | New Oriental vs. SPDR Series Trust | New Oriental vs. iShares Trust |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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