Correlation Between CVS Health and Hastings Technology

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

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

Diversification Opportunities for CVS Health and Hastings Technology

0.64

Correlation Coefficient

CVS Health  Hastings Technology

Poor diversification

The 3 months correlation between CVS and Hastings is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Hastings Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hastings Technology 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 Hastings Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hastings Technology has no effect on the direction of CVS Health i.e., CVS Health and Hastings Technology go up and down completely randomly.

Pair Corralation between CVS Health and Hastings Technology

Assuming the 90 days trading horizon CVS Health is expected to generate 2.78 times less return on investment than Hastings Technology. But when comparing it to its historical volatility, CVS Health is 2.53 times less risky than Hastings Technology. It trades about 0.07 of its potential returns per unit of risk. Hastings Technology Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Hastings Technology Metals on September 2, 2024 and sell it today you would earn a total of  3.00  from holding Hastings Technology Metals or generate 20.0% return on investment over 90 days.

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

CVS Health  vs.  Hastings Technology Metals

CVS Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hastings Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hastings Technology Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hastings Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and Hastings Technology

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

The idea behind CVS Health and Hastings Technology Metals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.