Correlation Between CVS Health and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both CVS Health and Spotify Technology 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 Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Spotify Technology SA, you can compare the effects of market volatilities on CVS Health and Spotify Technology 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 Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Spotify Technology.
Diversification Opportunities for CVS Health and Spotify Technology
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CVS and Spotify is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology 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 Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of CVS Health i.e., CVS Health and Spotify Technology go up and down completely randomly.
Pair Corralation between CVS Health and Spotify Technology
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Spotify Technology. In addition to that, CVS Health is 1.74 times more volatile than Spotify Technology SA. It trades about -0.31 of its total potential returns per unit of risk. Spotify Technology SA is currently generating about -0.06 per unit of volatility. If you would invest 73,000 in Spotify Technology SA on October 9, 2024 and sell it today you would lose (1,669) from holding Spotify Technology SA or give up 2.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Spotify Technology SA
Performance |
| Timeline |
| CVS Health |
| Spotify Technology |
CVS Health and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Spotify Technology
The main advantage of trading using opposite CVS Health and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Spotify Technology 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 Spotify Technology will offset losses from the drop in Spotify Technology's long position.| CVS Health vs. BTG Pactual Logstica | CVS Health vs. Plano Plano Desenvolvimento | CVS Health vs. Gen Digital | CVS Health vs. Cable One |
| Spotify Technology vs. TechnipFMC plc | Spotify Technology vs. Paycom Software | Spotify Technology vs. Verizon Communications | Spotify Technology vs. Bio Techne |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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