Correlation Between CVS Health and BROOKFBH 462

Can any of the company-specific risk be diversified away by investing in both CVS Health and BROOKFBH 462 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 BROOKFBH 462 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVS Health and BROOKFBH 462 PRSNU, you can compare the effects of market volatilities on CVS Health and BROOKFBH 462 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 BROOKFBH 462. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and BROOKFBH 462.

Diversification Opportunities for CVS Health and BROOKFBH 462

0.23

Correlation Coefficient

CVS Health  BROOKFBH 462

Modest diversification

The 3 months correlation between CVS and BROOKFBH is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and BROOKFBH 462 PRSNU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROOKFBH 462 PRSNU 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 BROOKFBH 462. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROOKFBH 462 PRSNU has no effect on the direction of CVS Health i.e., CVS Health and BROOKFBH 462 go up and down completely randomly.

Pair Corralation between CVS Health and BROOKFBH 462

Assuming the 90 days trading horizon CVS Health is expected to under-perform the BROOKFBH 462. In addition to that, CVS Health is 1.02 times more volatile than BROOKFBH 462 PRSNU. It trades about 0.0 of its total potential returns per unit of risk. BROOKFBH 462 PRSNU is currently generating about 0.01 per unit of volatility. If you would invest  1,457  in BROOKFBH 462 PRSNU on September 13, 2024 and sell it today you would lose (12.00) from holding BROOKFBH 462 PRSNU or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

CVS Health  vs.  BROOKFBH 462 PRSNU

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BROOKFBH 462 PRSNU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BROOKFBH 462 PRSNU has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BROOKFBH 462 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CVS Health and BROOKFBH 462

The main advantage of trading using opposite CVS Health and BROOKFBH 462 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, BROOKFBH 462 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 BROOKFBH 462 will offset losses from the drop in BROOKFBH 462's long position.

The idea behind CVS Health and BROOKFBH 462 PRSNU 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.