Correlation Between CVS Health and Abbott Laboratories
Can any of the company-specific risk be diversified away by investing in both CVS Health and Abbott Laboratories 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 Abbott Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Abbott Laboratories, you can compare the effects of market volatilities on CVS Health and Abbott Laboratories 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 Abbott Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Abbott Laboratories.
Diversification Opportunities for CVS Health and Abbott Laboratories
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and Abbott is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Abbott Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abbott Laboratories 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 Abbott Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abbott Laboratories has no effect on the direction of CVS Health i.e., CVS Health and Abbott Laboratories go up and down completely randomly.
Pair Corralation between CVS Health and Abbott Laboratories
Assuming the 90 days trading horizon CVS Health is expected to generate 2.15 times more return on investment than Abbott Laboratories. However, CVS Health is 2.15 times more volatile than Abbott Laboratories. It trades about 0.13 of its potential returns per unit of risk. Abbott Laboratories is currently generating about 0.17 per unit of risk. If you would invest 3,228 in CVS Health on September 12, 2024 and sell it today you would earn a total of 183.00 from holding CVS Health or generate 5.67% 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 vs. Abbott Laboratories
Performance |
| Timeline |
| CVS Health |
| Abbott Laboratories |
CVS Health and Abbott Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Abbott Laboratories
The main advantage of trading using opposite CVS Health and Abbott Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Abbott Laboratories 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 Abbott Laboratories will offset losses from the drop in Abbott Laboratories' 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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