Correlation Between CVS Health and First Majestic
Can any of the company-specific risk be diversified away by investing in both CVS Health and First Majestic 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 First Majestic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and First Majestic Silver, you can compare the effects of market volatilities on CVS Health and First Majestic 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 First Majestic. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and First Majestic.
Diversification Opportunities for CVS Health and First Majestic
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and First is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver 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 First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of CVS Health i.e., CVS Health and First Majestic go up and down completely randomly.
Pair Corralation between CVS Health and First Majestic
Assuming the 90 days trading horizon CVS Health is expected to generate 2.65 times more return on investment than First Majestic. However, CVS Health is 2.65 times more volatile than First Majestic Silver. It trades about 0.03 of its potential returns per unit of risk. First Majestic Silver is currently generating about -0.04 per unit of risk. If you would invest 114,811 in CVS Health on August 25, 2024 and sell it today you would earn a total of 3,889 from holding CVS Health or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. First Majestic Silver
Performance |
| Timeline |
| CVS Health |
| First Majestic Silver |
CVS Health and First Majestic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and First Majestic
The main advantage of trading using opposite CVS Health and First Majestic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, First Majestic 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 First Majestic will offset losses from the drop in First Majestic's long position.| CVS Health vs. Glencore plc | CVS Health vs. iShares Trust | CVS Health vs. US Bancorp | CVS Health vs. American Express |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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