Correlation Between CVS Health and Prudential Plc

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

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

Diversification Opportunities for CVS Health and Prudential Plc

0.0

Correlation Coefficient

CVS Health  Prudential Plc

Pay attention - limited upside

The 3 months correlation between CVS and Prudential is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential plc 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 Prudential Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential plc has no effect on the direction of CVS Health i.e., CVS Health and Prudential Plc go up and down completely randomly.

Pair Corralation between CVS Health and Prudential Plc

If you would invest  43,900  in Prudential plc on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Prudential plc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CVS Health  vs.  Prudential plc

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Prudential plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Prudential Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CVS Health and Prudential Plc

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

The idea behind CVS Health and Prudential plc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.