Correlation Between Element Solutions and CVS Health
Can any of the company-specific risk be diversified away by investing in both Element Solutions 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 Element Solutions and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Element Solutions and CVS Health, you can compare the effects of market volatilities on Element Solutions 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 Element Solutions with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and CVS Health.
Diversification Opportunities for Element Solutions and CVS Health
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Element and CVS is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Element Solutions 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 Element Solutions 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 Element Solutions i.e., Element Solutions and CVS Health go up and down completely randomly.
Pair Corralation between Element Solutions and CVS Health
Assuming the 90 days horizon Element Solutions is expected to generate 0.63 times more return on investment than CVS Health. However, Element Solutions is 1.6 times less risky than CVS Health. It trades about -0.17 of its potential returns per unit of risk. CVS Health is currently generating about -0.38 per unit of risk. If you would invest 2,612 in Element Solutions on September 21, 2024 and sell it today you would lose (172.00) from holding Element Solutions or give up 6.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Element Solutions vs. CVS Health
Performance |
| Timeline |
| Element Solutions |
| CVS Health |
Element Solutions and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Element Solutions and CVS Health
The main advantage of trading using opposite Element Solutions and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Element Solutions 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.| Element Solutions vs. CVS Health | Element Solutions vs. Sabra Health Care | Element Solutions vs. Bumrungrad Hospital Public | Element Solutions vs. Datalogic SpA |
| CVS Health vs. Gol Intelligent Airlines | CVS Health vs. BlueScope Steel Limited | CVS Health vs. RELIANCE STEEL AL | CVS Health vs. American Airlines Group |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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