Correlation Between CVS Health and Schlumberger
Can any of the company-specific risk be diversified away by investing in both CVS Health and Schlumberger 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 Schlumberger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Schlumberger Limited, you can compare the effects of market volatilities on CVS Health and Schlumberger 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 Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Schlumberger.
Diversification Opportunities for CVS Health and Schlumberger
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CVS and Schlumberger is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger Limited has no effect on the direction of CVS Health i.e., CVS Health and Schlumberger go up and down completely randomly.
Pair Corralation between CVS Health and Schlumberger
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Schlumberger. In addition to that, CVS Health is 1.07 times more volatile than Schlumberger Limited. It trades about -0.04 of its total potential returns per unit of risk. Schlumberger Limited is currently generating about -0.02 per unit of volatility. If you would invest 103,842 in Schlumberger Limited on October 7, 2024 and sell it today you would lose (24,542) from holding Schlumberger Limited or give up 23.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Schlumberger Limited
Performance |
| Timeline |
| CVS Health |
| Schlumberger Limited |
CVS Health and Schlumberger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Schlumberger
The main advantage of trading using opposite CVS Health and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Schlumberger 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 Schlumberger will offset losses from the drop in Schlumberger's long position.| CVS Health vs. Costco Wholesale | CVS Health vs. FibraHotel | CVS Health vs. McEwen Mining | CVS Health vs. Cognizant Technology Solutions |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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