Correlation Between CVS Health and Basic Materials
Can any of the company-specific risk be diversified away by investing in both CVS Health and Basic Materials 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 Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Basic Materials, you can compare the effects of market volatilities on CVS Health and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Basic Materials.
Diversification Opportunities for CVS Health and Basic Materials
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and Basic is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of CVS Health i.e., CVS Health and Basic Materials go up and down completely randomly.
Pair Corralation between CVS Health and Basic Materials
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Basic Materials. In addition to that, CVS Health is 1.96 times more volatile than Basic Materials. It trades about -0.02 of its total potential returns per unit of risk. Basic Materials is currently generating about 0.0 per unit of volatility. If you would invest 607,422 in Basic Materials on August 30, 2024 and sell it today you would lose (31,255) from holding Basic Materials or give up 5.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.36% |
| Values | Daily Returns |
CVS Health vs. Basic Materials
Performance |
| Timeline |
CVS Health and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
CVS Health
Pair trading matchups for CVS Health
Basic Materials
Pair trading matchups for Basic Materials
Pair Trading with CVS Health and Basic Materials
The main advantage of trading using opposite CVS Health and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| CVS Health vs. Costco Wholesale | CVS Health vs. The Trade Desk | CVS Health vs. MAHLE Metal Leve | CVS Health vs. Hospital Mater Dei |
| Basic Materials vs. CM Hospitalar SA | Basic Materials vs. Metalurgica Gerdau SA | Basic Materials vs. Broadcom | Basic Materials vs. Multilaser Industrial SA |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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