Correlation Between PT Bank and CVS Health

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

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

Diversification Opportunities for PT Bank and CVS Health

0.04

Correlation Coefficient

PT Bank  CVS Health

Significant diversification

The 3 months correlation between BOZA and CVS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and PT Bank 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 PT Bank Maybank 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 PT Bank i.e., PT Bank and CVS Health go up and down completely randomly.

Pair Corralation between PT Bank and CVS Health

Assuming the 90 days trading horizon PT Bank Maybank is expected to generate 1.75 times more return on investment than CVS Health. However, PT Bank is 1.75 times more volatile than CVS Health. It trades about -0.01 of its potential returns per unit of risk. CVS Health is currently generating about -0.08 per unit of risk. If you would invest  1.30  in PT Bank Maybank on September 21, 2024 and sell it today you would lose (0.15) from holding PT Bank Maybank or give up 11.54% of portfolio value over 90 days.

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

PT Bank Maybank  vs.  CVS Health

PT Bank Maybank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Maybank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CVS Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PT Bank and CVS Health

The main advantage of trading using opposite PT Bank and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Maybank 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.