Correlation Between CVS Health and Automatic Data
Can any of the company-specific risk be diversified away by investing in both CVS Health and Automatic Data 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 Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Automatic Data Processing, you can compare the effects of market volatilities on CVS Health and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Automatic Data.
Diversification Opportunities for CVS Health and Automatic Data
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and Automatic is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of CVS Health i.e., CVS Health and Automatic Data go up and down completely randomly.
Pair Corralation between CVS Health and Automatic Data
Assuming the 90 days trading horizon CVS Health is expected to generate 2.07 times more return on investment than Automatic Data. However, CVS Health is 2.07 times more volatile than Automatic Data Processing. It trades about 0.45 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.09 per unit of risk. If you would invest 2,765 in CVS Health on November 5, 2024 and sell it today you would earn a total of 530.00 from holding CVS Health or generate 19.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
CVS Health vs. Automatic Data Processing
Performance |
| Timeline |
| CVS Health |
| Automatic Data Processing |
CVS Health and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Automatic Data
The main advantage of trading using opposite CVS Health and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| CVS Health vs. Unity Software | CVS Health vs. Credit Acceptance | CVS Health vs. Ameriprise Financial | CVS Health vs. Sumitomo Mitsui Financial |
| Automatic Data vs. Guidewire Software, | Automatic Data vs. GP Investments | Automatic Data vs. Telecomunicaes Brasileiras SA | Automatic Data vs. Applied Materials, |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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