Correlation Between Grupo Financiero and CVS Health

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Can any of the company-specific risk be diversified away by investing in both Grupo Financiero 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 Grupo Financiero and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Financiero Banorte and CVS Health, you can compare the effects of market volatilities on Grupo Financiero 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 Grupo Financiero with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Financiero and CVS Health.

Diversification Opportunities for Grupo Financiero and CVS Health

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Grupo and CVS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Banorte and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Grupo Financiero 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 Grupo Financiero Banorte 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 has no effect on the direction of Grupo Financiero i.e., Grupo Financiero and CVS Health go up and down completely randomly.

Pair Corralation between Grupo Financiero and CVS Health

Assuming the 90 days trading horizon Grupo Financiero Banorte is expected to generate 0.91 times more return on investment than CVS Health. However, Grupo Financiero Banorte is 1.09 times less risky than CVS Health. It trades about 0.02 of its potential returns per unit of risk. CVS Health is currently generating about -0.03 per unit of risk. If you would invest  12,272  in Grupo Financiero Banorte on September 5, 2024 and sell it today you would earn a total of  1,906  from holding Grupo Financiero Banorte or generate 15.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Grupo Financiero Banorte  vs.  CVS Health

 Performance 
       Timeline  
Grupo Financiero Banorte 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Banorte are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Grupo Financiero is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
CVS Health 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grupo Financiero and CVS Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grupo Financiero and CVS Health

The main advantage of trading using opposite Grupo Financiero and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Financiero 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.
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The idea behind Grupo Financiero Banorte and CVS Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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