Correlation Between CVS Health and Micron Technology
Can any of the company-specific risk be diversified away by investing in both CVS Health and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Micron Technology, you can compare the effects of market volatilities on CVS Health and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Micron Technology.
Diversification Opportunities for CVS Health and Micron Technology
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and Micron is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of CVS Health i.e., CVS Health and Micron Technology go up and down completely randomly.
Pair Corralation between CVS Health and Micron Technology
Assuming the 90 days trading horizon CVS Health is expected to generate 1.17 times more return on investment than Micron Technology. However, CVS Health is 1.17 times more volatile than Micron Technology. It trades about 0.11 of its potential returns per unit of risk. Micron Technology is currently generating about 0.01 per unit of risk. If you would invest 114,800 in CVS Health on August 28, 2024 and sell it today you would earn a total of 7,699 from holding CVS Health or generate 6.71% 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. Micron Technology
Performance |
| Timeline |
| CVS Health |
| Micron Technology |
CVS Health and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Micron Technology
The main advantage of trading using opposite CVS Health and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.| CVS Health vs. Glencore plc | CVS Health vs. iShares Trust | CVS Health vs. US Bancorp | CVS Health vs. American Express |
| Micron Technology vs. Southwest Airlines | Micron Technology vs. Deutsche Bank Aktiengesellschaft | Micron Technology vs. Ameriprise Financial | Micron Technology vs. Costco Wholesale |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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