Correlation Between Ming Le and CVS Health
Can any of the company-specific risk be diversified away by investing in both Ming Le 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 Ming Le and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ming Le Sports and CVS Health, you can compare the effects of market volatilities on Ming Le 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 Ming Le with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Le and CVS Health.
Diversification Opportunities for Ming Le and CVS Health
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ming and CVS is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ming Le Sports and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Ming Le 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 Ming Le Sports 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 Ming Le i.e., Ming Le and CVS Health go up and down completely randomly.
Pair Corralation between Ming Le and CVS Health
Assuming the 90 days trading horizon Ming Le Sports is expected to generate 1.04 times more return on investment than CVS Health. However, Ming Le is 1.04 times more volatile 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 129.00 in Ming Le Sports on September 4, 2024 and sell it today you would earn a total of 10.00 from holding Ming Le Sports or generate 7.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ming Le Sports vs. CVS Health
Performance |
| Timeline |
| Ming Le Sports |
| CVS Health |
Ming Le and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ming Le and CVS Health
The main advantage of trading using opposite Ming Le and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ming Le 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.The idea behind Ming Le Sports 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.| CVS Health vs. TOTAL GABON | CVS Health vs. Walgreens Boots Alliance | CVS Health vs. Peak Resources Limited |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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