Correlation Between Samsung Electronics and CVS Health

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

Diversification Opportunities for Samsung Electronics and CVS Health

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Samsung and CVS is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and CVS Health go up and down completely randomly.

Pair Corralation between Samsung Electronics and CVS Health

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.42 times less risky than CVS Health. The stock trades about -0.15 of its potential returns per unit of risk. The CVS Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  110,730  in CVS Health on August 25, 2024 and sell it today you would earn a total of  7,970  from holding CVS Health or generate 7.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy97.67%
ValuesDaily Returns

Samsung Electronics Co  vs.  CVS Health

 Performance 
       Timeline  
Samsung Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
CVS Health 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, CVS Health is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Samsung Electronics and CVS Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Samsung Electronics and CVS Health

The main advantage of trading using opposite Samsung Electronics and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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 Samsung Electronics Co 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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