Correlation Between CVS Health and JAPAN TOBACCO

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

By analyzing existing cross correlation between CVS Health and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on CVS Health and JAPAN TOBACCO 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 JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and JAPAN TOBACCO.

Diversification Opportunities for CVS Health and JAPAN TOBACCO

0.39

Correlation Coefficient

CVS Health  JAPAN TOBACCO

Weak diversification

The 3 months correlation between CVS and JAPAN is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of CVS Health i.e., CVS Health and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between CVS Health and JAPAN TOBACCO

Assuming the 90 days trading horizon CVS Health is expected to generate 1.71 times more return on investment than JAPAN TOBACCO. However, CVS Health is 1.71 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.07 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.04 per unit of risk. If you would invest  5,125  in CVS Health on August 31, 2024 and sell it today you would earn a total of  535.00  from holding CVS Health or generate 10.44% return on investment over 90 days.

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

CVS Health  vs.  JAPAN TOBACCO UNSPADR12

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 fragile basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN TOBACCO UNSPADR12 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, JAPAN TOBACCO is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CVS Health and JAPAN TOBACCO

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

The idea behind CVS Health and JAPAN TOBACCO UNSPADR12 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.