Correlation Between CVS Health and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both CVS Health and Occidental Petroleum 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 Occidental Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Occidental Petroleum, you can compare the effects of market volatilities on CVS Health and Occidental Petroleum 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 Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Occidental Petroleum.
Diversification Opportunities for CVS Health and Occidental Petroleum
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and Occidental is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of CVS Health i.e., CVS Health and Occidental Petroleum go up and down completely randomly.
Pair Corralation between CVS Health and Occidental Petroleum
Assuming the 90 days trading horizon CVS Health is expected to generate 2.42 times more return on investment than Occidental Petroleum. However, CVS Health is 2.42 times more volatile than Occidental Petroleum. It trades about 0.11 of its potential returns per unit of risk. Occidental Petroleum is currently generating about 0.09 per unit of risk. If you would invest 3,270 in CVS Health on August 31, 2024 and sell it today you would earn a total of 256.00 from holding CVS Health or generate 7.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
CVS Health vs. Occidental Petroleum
Performance |
| Timeline |
| CVS Health |
| Occidental Petroleum |
CVS Health and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Occidental Petroleum
The main advantage of trading using opposite CVS Health and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Occidental Petroleum 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 Occidental Petroleum will offset losses from the drop in Occidental Petroleum'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 |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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