Correlation Between CVS Health and Central Garden
Can any of the company-specific risk be diversified away by investing in both CVS Health and Central Garden 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 Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health Corp and Central Garden Pet, you can compare the effects of market volatilities on CVS Health and Central Garden 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 Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Central Garden.
Diversification Opportunities for CVS Health and Central Garden
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CVS and Central is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet 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 Corp are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of CVS Health i.e., CVS Health and Central Garden go up and down completely randomly.
Pair Corralation between CVS Health and Central Garden
Considering the 90-day investment horizon CVS Health Corp is expected to generate 1.43 times more return on investment than Central Garden. However, CVS Health is 1.43 times more volatile than Central Garden Pet. It trades about 0.2 of its potential returns per unit of risk. Central Garden Pet is currently generating about 0.05 per unit of risk. If you would invest 5,635 in CVS Health Corp on December 6, 2024 and sell it today you would earn a total of 890.00 from holding CVS Health Corp or generate 15.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health Corp vs. Central Garden Pet
Performance |
| Timeline |
| CVS Health Corp |
| Central Garden Pet |
CVS Health and Central Garden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Central Garden
The main advantage of trading using opposite CVS Health and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Central Garden 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 Central Garden will offset losses from the drop in Central Garden's long position.| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
| Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden vs. J J Snack | Central Garden vs. Central Garden Pet |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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