Correlation Between CVS Health and CENTURIA OFFICE

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

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

Diversification Opportunities for CVS Health and CENTURIA OFFICE

0.77

Correlation Coefficient

CVS Health  CENTURIA OFFICE

Poor diversification

The 3 months correlation between CVS and CENTURIA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and CENTURIA OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTURIA OFFICE REIT 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 CENTURIA OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTURIA OFFICE REIT has no effect on the direction of CVS Health i.e., CVS Health and CENTURIA OFFICE go up and down completely randomly.

Pair Corralation between CVS Health and CENTURIA OFFICE

Assuming the 90 days trading horizon CVS Health is expected to under-perform the CENTURIA OFFICE. In addition to that, CVS Health is 1.97 times more volatile than CENTURIA OFFICE REIT. It trades about -0.08 of its total potential returns per unit of risk. CENTURIA OFFICE REIT is currently generating about -0.08 per unit of volatility. If you would invest  72.00  in CENTURIA OFFICE REIT on September 19, 2024 and sell it today you would lose (6.00) from holding CENTURIA OFFICE REIT or give up 8.33% of portfolio value over 90 days.

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

CVS Health  vs.  CENTURIA OFFICE REIT

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 uncertain 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.

CENTURIA OFFICE REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CENTURIA OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CVS Health and CENTURIA OFFICE

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

The idea behind CVS Health and CENTURIA OFFICE REIT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.