Correlation Between US Bancorp and CVS Health
Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and CVS Health, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and CVS Health.
Diversification Opportunities for US Bancorp and CVS Health
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between USB and CVS is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and US Bancorp 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 US Bancorp 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 US Bancorp i.e., US Bancorp and CVS Health go up and down completely randomly.
Pair Corralation between US Bancorp and CVS Health
Assuming the 90 days trading horizon US Bancorp is expected to generate 3.14 times less return on investment than CVS Health. But when comparing it to its historical volatility, US Bancorp is 2.4 times less risky than CVS Health. It trades about 0.08 of its potential returns per unit of risk. CVS Health is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 111,500 in CVS Health on August 25, 2024 and sell it today you would earn a total of 7,200 from holding CVS Health or generate 6.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
US Bancorp vs. CVS Health
Performance |
| Timeline |
| US Bancorp |
| CVS Health |
US Bancorp and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and CVS Health
The main advantage of trading using opposite US Bancorp and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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.| US Bancorp vs. Glencore plc | US Bancorp vs. iShares Global Timber | US Bancorp vs. Vanguard World | US Bancorp vs. iShares Trust |
| CVS Health vs. Glencore plc | CVS Health vs. iShares Trust | CVS Health vs. US Bancorp | CVS Health vs. American Express |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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