Correlation Between CVS Health and AbbVie
Can any of the company-specific risk be diversified away by investing in both CVS Health and AbbVie 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 AbbVie into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and AbbVie Inc, you can compare the effects of market volatilities on CVS Health and AbbVie 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 AbbVie. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and AbbVie.
Diversification Opportunities for CVS Health and AbbVie
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and AbbVie is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc 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 AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of CVS Health i.e., CVS Health and AbbVie go up and down completely randomly.
Pair Corralation between CVS Health and AbbVie
Assuming the 90 days trading horizon CVS Health is expected to generate 2.58 times less return on investment than AbbVie. In addition to that, CVS Health is 1.41 times more volatile than AbbVie Inc. It trades about 0.02 of its total potential returns per unit of risk. AbbVie Inc is currently generating about 0.08 per unit of volatility. If you would invest 4,417 in AbbVie Inc on September 12, 2024 and sell it today you would earn a total of 2,239 from holding AbbVie Inc or generate 50.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.96% |
| Values | Daily Returns |
CVS Health vs. AbbVie Inc
Performance |
| Timeline |
| CVS Health |
| AbbVie Inc |
CVS Health and AbbVie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and AbbVie
The main advantage of trading using opposite CVS Health and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, AbbVie 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 AbbVie will offset losses from the drop in AbbVie's long position.| CVS Health vs. Fundo Investimento Imobiliario | CVS Health vs. LESTE FDO INV | CVS Health vs. Fras le SA | CVS Health vs. Western Digital |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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