Correlation Between CVS Health and International Business
Can any of the company-specific risk be diversified away by investing in both CVS Health and International Business 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 International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and International Business Machines, you can compare the effects of market volatilities on CVS Health and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and International Business.
Diversification Opportunities for CVS Health and International Business
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and International is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of CVS Health i.e., CVS Health and International Business go up and down completely randomly.
Pair Corralation between CVS Health and International Business
Assuming the 90 days trading horizon CVS Health is expected to under-perform the International Business. In addition to that, CVS Health is 1.45 times more volatile than International Business Machines. It trades about -0.01 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.15 per unit of volatility. If you would invest 255,456 in International Business Machines on September 14, 2024 and sell it today you would earn a total of 214,544 from holding International Business Machines or generate 83.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
CVS Health vs. International Business Machine
Performance |
| Timeline |
| CVS Health |
| International Business |
CVS Health and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and International Business
The main advantage of trading using opposite CVS Health and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| CVS Health vs. Micron Technology | CVS Health vs. Deutsche Bank Aktiengesellschaft | CVS Health vs. McEwen Mining | CVS Health vs. Lloyds Banking Group |
| International Business vs. Martin Marietta Materials | International Business vs. CVS Health | International Business vs. Deutsche Bank Aktiengesellschaft | International Business vs. McEwen Mining |
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 CEOs Directory module to screen CEOs from public companies around the world.
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