Correlation Between CVS Health and MARKET VECTR

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

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

Diversification Opportunities for CVS Health and MARKET VECTR

-0.4

Correlation Coefficient

CVS Health  MARKET VECTR

Very good diversification

The 3 months correlation between CVS and MARKET is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and MARKET VECTR RETAIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARKET VECTR RETAIL 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 MARKET VECTR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARKET VECTR RETAIL has no effect on the direction of CVS Health i.e., CVS Health and MARKET VECTR go up and down completely randomly.

Pair Corralation between CVS Health and MARKET VECTR

Assuming the 90 days trading horizon CVS Health is expected to under-perform the MARKET VECTR. In addition to that, CVS Health is 3.88 times more volatile than MARKET VECTR RETAIL. It trades about -0.57 of its total potential returns per unit of risk. MARKET VECTR RETAIL is currently generating about -0.07 per unit of volatility. If you would invest  21,890  in MARKET VECTR RETAIL on September 28, 2024 and sell it today you would lose (195.00) from holding MARKET VECTR RETAIL or give up 0.89% of portfolio value over 90 days.

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

CVS Health  vs.  MARKET VECTR RETAIL

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.

MARKET VECTR RETAIL

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MARKET VECTR RETAIL are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, MARKET VECTR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CVS Health and MARKET VECTR

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

The idea behind CVS Health and MARKET VECTR RETAIL 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.