Correlation Between CVS Health and Nasdaq
Can any of the company-specific risk be diversified away by investing in both CVS Health and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Nasdaq Inc, you can compare the effects of market volatilities on CVS Health and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Nasdaq.
Diversification Opportunities for CVS Health and Nasdaq
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CVS and Nasdaq is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of CVS Health i.e., CVS Health and Nasdaq go up and down completely randomly.
Pair Corralation between CVS Health and Nasdaq
Assuming the 90 days trading horizon CVS Health is expected to generate 5.76 times less return on investment than Nasdaq. In addition to that, CVS Health is 1.85 times more volatile than Nasdaq Inc. It trades about 0.02 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.18 per unit of volatility. If you would invest 13,310 in Nasdaq Inc on September 2, 2024 and sell it today you would earn a total of 11,662 from holding Nasdaq Inc or generate 87.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.8% |
| Values | Daily Returns |
CVS Health vs. Nasdaq Inc
Performance |
| Timeline |
| CVS Health |
| Nasdaq Inc |
CVS Health and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Nasdaq
The main advantage of trading using opposite CVS Health and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.| CVS Health vs. Fras le SA | CVS Health vs. Western Digital | CVS Health vs. Energisa SA | CVS Health vs. Clave Indices De |
| Nasdaq vs. Cognizant Technology Solutions | Nasdaq vs. CVS Health | Nasdaq vs. United Airlines Holdings | Nasdaq vs. G2D Investments |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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