Correlation Between CVS Health and State Street
Can any of the company-specific risk be diversified away by investing in both CVS Health and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and State Street, you can compare the effects of market volatilities on CVS Health and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and State Street.
Diversification Opportunities for CVS Health and State Street
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and State is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of CVS Health i.e., CVS Health and State Street go up and down completely randomly.
Pair Corralation between CVS Health and State Street
Assuming the 90 days trading horizon CVS Health is expected to generate 2.72 times less return on investment than State Street. In addition to that, CVS Health is 1.06 times more volatile than State Street. It trades about 0.06 of its total potential returns per unit of risk. State Street is currently generating about 0.17 per unit of volatility. If you would invest 127,466 in State Street on September 2, 2024 and sell it today you would earn a total of 69,034 from holding State Street or generate 54.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
CVS Health vs. State Street
Performance |
| Timeline |
| CVS Health |
| State Street |
CVS Health and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and State Street
The main advantage of trading using opposite CVS Health and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| CVS Health vs. DXC Technology | CVS Health vs. United Airlines Holdings | CVS Health vs. Genworth Financial | CVS Health vs. Deutsche Bank Aktiengesellschaft |
| State Street vs. The Bank of | State Street vs. Monster Beverage Corp | State Street vs. Applied Materials | State Street vs. Martin Marietta Materials |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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