Correlation Between Elevance Health and CVS Health
Can any of the company-specific risk be diversified away by investing in both Elevance Health and CVS Health 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 Elevance Health and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elevance Health and CVS Health Corp, you can compare the effects of market volatilities on Elevance Health and CVS Health 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 Elevance Health with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elevance Health and CVS Health.
Diversification Opportunities for Elevance Health and CVS Health
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Elevance and CVS is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Elevance 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 Elevance Health are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Elevance Health i.e., Elevance Health and CVS Health go up and down completely randomly.
Pair Corralation between Elevance Health and CVS Health
Considering the 90-day investment horizon Elevance Health is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, Elevance Health is 1.5 times less risky than CVS Health. The stock trades about -0.06 of its potential returns per unit of risk. The CVS Health Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 7,203 in CVS Health Corp on August 27, 2024 and sell it today you would lose (1,402) from holding CVS Health Corp or give up 19.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elevance Health vs. CVS Health Corp
Performance |
| Timeline |
| Elevance Health |
| CVS Health Corp |
Elevance Health and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elevance Health and CVS Health
The main advantage of trading using opposite Elevance Health and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elevance Health position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Elevance Health vs. Cigna Corp | Elevance Health vs. UnitedHealth Group Incorporated | Elevance Health vs. Centene Corp | Elevance Health vs. Molina Healthcare |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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