Correlation Between Leons Furniture and CVS HEALTH
Can any of the company-specific risk be diversified away by investing in both Leons Furniture 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 Leons Furniture and CVS HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leons Furniture Limited and CVS HEALTH CDR, you can compare the effects of market volatilities on Leons Furniture 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 Leons Furniture with a short position of CVS HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leons Furniture and CVS HEALTH.
Diversification Opportunities for Leons Furniture and CVS HEALTH
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leons and CVS is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR and Leons Furniture 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 Leons Furniture Limited 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 CDR has no effect on the direction of Leons Furniture i.e., Leons Furniture and CVS HEALTH go up and down completely randomly.
Pair Corralation between Leons Furniture and CVS HEALTH
Assuming the 90 days trading horizon Leons Furniture is expected to generate 4.83 times less return on investment than CVS HEALTH. But when comparing it to its historical volatility, Leons Furniture Limited is 2.69 times less risky than CVS HEALTH. It trades about 0.04 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,409 in CVS HEALTH CDR on September 1, 2024 and sell it today you would earn a total of 69.00 from holding CVS HEALTH CDR or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leons Furniture Limited vs. CVS HEALTH CDR
Performance |
| Timeline |
| Leons Furniture |
| CVS HEALTH CDR |
Leons Furniture and CVS HEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leons Furniture and CVS HEALTH
The main advantage of trading using opposite Leons Furniture and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture 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.| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
| CVS HEALTH vs. Extendicare | CVS HEALTH vs. Sienna Senior Living | CVS HEALTH vs. Chemtrade Logistics Income | CVS HEALTH vs. iShares Canadian HYBrid |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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