Correlation Between CVS Health and Mastercard Incorporated
Can any of the company-specific risk be diversified away by investing in both CVS Health and Mastercard Incorporated 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 Mastercard Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Mastercard Incorporated, you can compare the effects of market volatilities on CVS Health and Mastercard Incorporated 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 Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Mastercard Incorporated.
Diversification Opportunities for CVS Health and Mastercard Incorporated
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and Mastercard is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of CVS Health i.e., CVS Health and Mastercard Incorporated go up and down completely randomly.
Pair Corralation between CVS Health and Mastercard Incorporated
Assuming the 90 days trading horizon CVS Health is expected to generate 20.46 times less return on investment than Mastercard Incorporated. In addition to that, CVS Health is 1.82 times more volatile than Mastercard Incorporated. It trades about 0.0 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.12 per unit of volatility. If you would invest 781,631 in Mastercard Incorporated on November 5, 2024 and sell it today you would earn a total of 373,044 from holding Mastercard Incorporated or generate 47.73% 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. Mastercard Incorporated
Performance |
| Timeline |
| CVS Health |
| Mastercard Incorporated |
CVS Health and Mastercard Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Mastercard Incorporated
The main advantage of trading using opposite CVS Health and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Mastercard Incorporated 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 Mastercard Incorporated will offset losses from the drop in Mastercard Incorporated's long position.| CVS Health vs. UnitedHealth Group Incorporated | CVS Health vs. Air Transport Services | CVS Health vs. Ameriprise Financial | CVS Health vs. Verizon Communications |
| Mastercard Incorporated vs. Prudential Financial | Mastercard Incorporated vs. Micron Technology | Mastercard Incorporated vs. UnitedHealth Group Incorporated | Mastercard Incorporated vs. DXC Technology |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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