Correlation Between CVS HEALTH and Green Impact

Can any of the company-specific risk be diversified away by investing in both CVS HEALTH and Green Impact 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 Green Impact 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 Green Impact Partners, you can compare the effects of market volatilities on CVS HEALTH and Green Impact 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 Green Impact. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and Green Impact.

Diversification Opportunities for CVS HEALTH and Green Impact

0.66

Correlation Coefficient

CVS HEALTH  Green Impact

Poor diversification

The 3 months correlation between CVS and Green is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Green Impact Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Impact Partners 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 Green Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Impact Partners has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Green Impact go up and down completely randomly.

Pair Corralation between CVS HEALTH and Green Impact

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Green Impact. But the stock apears to be less risky and, when comparing its historical volatility, CVS HEALTH CDR is 1.2 times less risky than Green Impact. The stock trades about -0.04 of its potential returns per unit of risk. The Green Impact Partners is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  331.00  in Green Impact Partners on September 12, 2024 and sell it today you would earn a total of  20.00  from holding Green Impact Partners or generate 6.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

CVS HEALTH CDR  vs.  Green Impact Partners

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Green Impact Partners

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Green Impact Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Green Impact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CVS HEALTH and Green Impact

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

The idea behind CVS HEALTH CDR and Green Impact Partners 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.