Correlation Between CVS Health and Eledon Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both CVS Health and Eledon Pharmaceuticals 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 Eledon Pharmaceuticals 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 Eledon Pharmaceuticals, you can compare the effects of market volatilities on CVS Health and Eledon Pharmaceuticals 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 Eledon Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Eledon Pharmaceuticals.
Diversification Opportunities for CVS Health and Eledon Pharmaceuticals
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and Eledon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Eledon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eledon Pharmaceuticals 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 Eledon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eledon Pharmaceuticals has no effect on the direction of CVS Health i.e., CVS Health and Eledon Pharmaceuticals go up and down completely randomly.
Pair Corralation between CVS Health and Eledon Pharmaceuticals
Considering the 90-day investment horizon CVS Health Corp is expected to generate 1.27 times more return on investment than Eledon Pharmaceuticals. However, CVS Health is 1.27 times more volatile than Eledon Pharmaceuticals. It trades about 0.33 of its potential returns per unit of risk. Eledon Pharmaceuticals is currently generating about 0.22 per unit of risk. If you would invest 5,196 in CVS Health Corp on November 18, 2024 and sell it today you would earn a total of 1,387 from holding CVS Health Corp or generate 26.69% 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 Corp vs. Eledon Pharmaceuticals
Performance |
| Timeline |
| CVS Health Corp |
| Eledon Pharmaceuticals |
CVS Health and Eledon Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Eledon Pharmaceuticals
The main advantage of trading using opposite CVS Health and Eledon Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Eledon Pharmaceuticals 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 Eledon Pharmaceuticals will offset losses from the drop in Eledon Pharmaceuticals' long position.| CVS Health vs. The Ensign Group | CVS Health vs. Select Medical Holdings | CVS Health vs. Encompass Health Corp | CVS Health vs. InnovAge Holding Corp |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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