Correlation Between Salesforce and CVS Health

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

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

Diversification Opportunities for Salesforce and CVS Health

-0.07

Correlation Coefficient

Salesforce  CVS Health

Good diversification

The 3 months correlation between Salesforce and CVS is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Salesforce and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Salesforce 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 Salesforce 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 Corp has no effect on the direction of Salesforce i.e., Salesforce and CVS Health go up and down completely randomly.

Pair Corralation between Salesforce and CVS Health

Considering the 90-day investment horizon Salesforce is expected to generate 1.07 times more return on investment than CVS Health. However, Salesforce is 1.07 times more volatile than CVS Health Corp. It trades about 0.1 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.04 per unit of risk. If you would invest  13,053  in Salesforce on August 30, 2024 and sell it today you would earn a total of  19,948  from holding Salesforce or generate 152.82% return on investment over 90 days.

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

Salesforce  vs.  CVS Health Corp

Salesforce

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Salesforce displayed solid returns over the last few months and may actually be approaching a breakup point.

CVS Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Salesforce and CVS Health

The main advantage of trading using opposite Salesforce and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Salesforce 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 Salesforce and CVS Health Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.