Correlation Between United States and CVS Health
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and CVS Health, you can compare the effects of market volatilities on United States 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 United States with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and CVS Health.
Diversification Opportunities for United States and CVS Health
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and CVS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and United States 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 United States Steel 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 United States i.e., United States and CVS Health go up and down completely randomly.
Pair Corralation between United States and CVS Health
Given the investment horizon of 90 days United States is expected to generate 1.08 times less return on investment than CVS Health. In addition to that, United States is 1.68 times more volatile than CVS Health. It trades about 0.27 of its total potential returns per unit of risk. CVS Health is currently generating about 0.49 per unit of volatility. If you would invest 88,695 in CVS Health on October 24, 2024 and sell it today you would earn a total of 20,305 from holding CVS Health or generate 22.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. CVS Health
Performance |
| Timeline |
| United States Steel |
| CVS Health |
United States and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and CVS Health
The main advantage of trading using opposite United States and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Capital One Financial | United States vs. Ameriprise Financial | United States vs. GMxico Transportes SAB | United States vs. UnitedHealth Group Incorporated |
| CVS Health vs. United States Steel | CVS Health vs. Delta Air Lines | CVS Health vs. Grupo Hotelero Santa | CVS Health vs. First Majestic Silver |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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