Correlation Between CVS Health and Aurora Investment

Can any of the company-specific risk be diversified away by investing in both CVS Health and Aurora Investment 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 CVS Health and Aurora Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVS Health Corp and Aurora Investment Trust, you can compare the effects of market volatilities on CVS Health and Aurora Investment 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 CVS Health with a short position of Aurora Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Aurora Investment.

Diversification Opportunities for CVS Health and Aurora Investment

0.26

Correlation Coefficient

CVS Health  Aurora Investment

Modest diversification

The 3 months correlation between CVS and Aurora is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Aurora Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Investment Trust and CVS Health 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 CVS Health Corp are associated (or correlated) with Aurora Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Investment Trust has no effect on the direction of CVS Health i.e., CVS Health and Aurora Investment go up and down completely randomly.

Pair Corralation between CVS Health and Aurora Investment

Assuming the 90 days trading horizon CVS Health Corp is expected to under-perform the Aurora Investment. In addition to that, CVS Health is 2.39 times more volatile than Aurora Investment Trust. It trades about -0.06 of its total potential returns per unit of risk. Aurora Investment Trust is currently generating about -0.13 per unit of volatility. If you would invest  25,190  in Aurora Investment Trust on September 14, 2024 and sell it today you would lose (2,390) from holding Aurora Investment Trust or give up 9.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CVS Health Corp  vs.  Aurora Investment Trust

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Aurora Investment Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CVS Health and Aurora Investment

The main advantage of trading using opposite CVS Health and Aurora Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Aurora Investment 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 Aurora Investment will offset losses from the drop in Aurora Investment's long position.

The idea behind CVS Health Corp and Aurora Investment Trust 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.