Correlation Between CVS Health and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both CVS Health and Goodyear Tire 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 Goodyear Tire 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 Goodyear Tire, you can compare the effects of market volatilities on CVS Health and Goodyear Tire 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 Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Goodyear Tire.
Diversification Opportunities for CVS Health and Goodyear Tire
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and Goodyear is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and The Goodyear Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire 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 Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire has no effect on the direction of CVS Health i.e., CVS Health and Goodyear Tire go up and down completely randomly.
Pair Corralation between CVS Health and Goodyear Tire
If you would invest 91,889 in CVS Health on November 7, 2024 and sell it today you would earn a total of 21,985 from holding CVS Health or generate 23.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 86.36% |
| Values | Daily Returns |
CVS Health vs. The Goodyear Tire
Performance |
| Timeline |
| CVS Health |
| Goodyear Tire |
CVS Health and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Goodyear Tire
The main advantage of trading using opposite CVS Health and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Goodyear Tire 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 Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.| CVS Health vs. Southern Copper | CVS Health vs. Micron Technology | CVS Health vs. Cognizant Technology Solutions | CVS Health vs. First Majestic Silver |
| Goodyear Tire vs. DXC Technology | Goodyear Tire vs. Southwest Airlines | Goodyear Tire vs. Verizon Communications | Goodyear Tire vs. The Home Depot |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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