Correlation Between CVS HEALTH and Canso Select

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

By analyzing existing cross correlation between CVS HEALTH CDR and Canso Select Opportunities, you can compare the effects of market volatilities on CVS HEALTH and Canso Select 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 Canso Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and Canso Select.

Diversification Opportunities for CVS HEALTH and Canso Select

-0.26

Correlation Coefficient

CVS HEALTH  Canso Select

Very good diversification

The 3 months correlation between CVS and Canso is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Canso Select Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canso Select Opportu 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 CDR are associated (or correlated) with Canso Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canso Select Opportu has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Canso Select go up and down completely randomly.

Pair Corralation between CVS HEALTH and Canso Select

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Canso Select. But the stock apears to be less risky and, when comparing its historical volatility, CVS HEALTH CDR is 1.51 times less risky than Canso Select. The stock trades about -0.06 of its potential returns per unit of risk. The Canso Select Opportunities is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  205.00  in Canso Select Opportunities on September 26, 2024 and sell it today you would earn a total of  25.00  from holding Canso Select Opportunities or generate 12.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

CVS HEALTH CDR  vs.  Canso Select Opportunities

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Canso Select Opportu

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canso Select Opportunities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Canso Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CVS HEALTH and Canso Select

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

The idea behind CVS HEALTH CDR and Canso Select Opportunities 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.