Correlation Between CVS Health and United Parcel
Can any of the company-specific risk be diversified away by investing in both CVS Health and United Parcel 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 United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and United Parcel Service, you can compare the effects of market volatilities on CVS Health and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and United Parcel.
Diversification Opportunities for CVS Health and United Parcel
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and United is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of CVS Health i.e., CVS Health and United Parcel go up and down completely randomly.
Pair Corralation between CVS Health and United Parcel
Assuming the 90 days trading horizon CVS Health is expected to generate 3.17 times more return on investment than United Parcel. However, CVS Health is 3.17 times more volatile than United Parcel Service. It trades about 0.11 of its potential returns per unit of risk. United Parcel Service is currently generating about 0.23 per unit of risk. If you would invest 113,200 in CVS Health on September 2, 2024 and sell it today you would earn a total of 8,200 from holding CVS Health or generate 7.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
CVS Health vs. United Parcel Service
Performance |
| Timeline |
| CVS Health |
| United Parcel Service |
CVS Health and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and United Parcel
The main advantage of trading using opposite CVS Health and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel'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 |
| United Parcel vs. CVS Health | United Parcel vs. Samsung Electronics Co | United Parcel vs. Micron Technology | United Parcel vs. Southern Copper |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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