Correlation Between CVS Health and General Dynamics
Can any of the company-specific risk be diversified away by investing in both CVS Health and General Dynamics 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 General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and General Dynamics, you can compare the effects of market volatilities on CVS Health and General Dynamics 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 General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and General Dynamics.
Diversification Opportunities for CVS Health and General Dynamics
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CVS and General is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of CVS Health i.e., CVS Health and General Dynamics go up and down completely randomly.
Pair Corralation between CVS Health and General Dynamics
Assuming the 90 days trading horizon CVS Health is expected to generate 7.37 times less return on investment than General Dynamics. In addition to that, CVS Health is 2.23 times more volatile than General Dynamics. It trades about 0.01 of its total potential returns per unit of risk. General Dynamics is currently generating about 0.12 per unit of volatility. If you would invest 428,515 in General Dynamics on September 4, 2024 and sell it today you would earn a total of 147,985 from holding General Dynamics or generate 34.53% 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. General Dynamics
Performance |
| Timeline |
| CVS Health |
| General Dynamics |
CVS Health and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and General Dynamics
The main advantage of trading using opposite CVS Health and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, General Dynamics 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 General Dynamics will offset losses from the drop in General Dynamics' 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 |
| General Dynamics vs. Costco Wholesale | General Dynamics vs. Applied Materials | General Dynamics vs. CVS Health | General Dynamics vs. FibraHotel |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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