Correlation Between Ensign and CVS Health
Can any of the company-specific risk be diversified away by investing in both Ensign 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 Ensign and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Ensign Group and CVS Health Corp, you can compare the effects of market volatilities on Ensign 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 Ensign with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ensign and CVS Health.
Diversification Opportunities for Ensign and CVS Health
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ensign and CVS is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding The Ensign Group 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 Ensign 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 The Ensign Group 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 Ensign i.e., Ensign and CVS Health go up and down completely randomly.
Pair Corralation between Ensign and CVS Health
Given the investment horizon of 90 days The Ensign Group is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, The Ensign Group is 1.78 times less risky than CVS Health. The stock trades about -0.11 of its potential returns per unit of risk. The CVS Health Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,424 in CVS Health Corp on December 8, 2024 and sell it today you would earn a total of 1,209 from holding CVS Health Corp or generate 22.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Ensign Group vs. CVS Health Corp
Performance |
| Timeline |
| Ensign Group |
| CVS Health Corp |
Ensign and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ensign and CVS Health
The main advantage of trading using opposite Ensign and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ensign 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.| Ensign vs. Enhabit | ||
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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