Correlation Between CVS Health and AEGEAN AIRLINES

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

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

Diversification Opportunities for CVS Health and AEGEAN AIRLINES

0.01

Correlation Coefficient

CVS Health  AEGEAN AIRLINES

Significant diversification

The 3 months correlation between CVS and AEGEAN is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 are associated (or correlated) with AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of CVS Health i.e., CVS Health and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between CVS Health and AEGEAN AIRLINES

Assuming the 90 days trading horizon CVS Health is expected to generate 2.17 times more return on investment than AEGEAN AIRLINES. However, CVS Health is 2.17 times more volatile than AEGEAN AIRLINES. It trades about -0.03 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about -0.08 per unit of risk. If you would invest  5,179  in CVS Health on September 14, 2024 and sell it today you would lose (372.00) from holding CVS Health or give up 7.18% of portfolio value over 90 days.

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

CVS Health  vs.  AEGEAN AIRLINES

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 rather sound basic indicators, CVS Health is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES 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 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 AEGEAN AIRLINES

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

The idea behind CVS Health and AEGEAN AIRLINES 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.