Correlation Between CVS HEALTH and Themac Resources

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

Diversification Opportunities for CVS HEALTH and Themac Resources

0.3

Correlation Coefficient

CVS HEALTH  Themac Resources

Weak diversification

The 3 months correlation between CVS and Themac is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Themac Resources Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themac Resources 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 Themac Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themac Resources has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Themac Resources go up and down completely randomly.

Pair Corralation between CVS HEALTH and Themac Resources

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Themac Resources. But the stock apears to be less risky and, when comparing its historical volatility, CVS HEALTH CDR is 4.82 times less risky than Themac Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Themac Resources Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Themac Resources Group on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Themac Resources Group or generate 0.0% 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 CDR  vs.  Themac Resources Group

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 unfluctuating 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.

Themac Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Themac Resources Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Themac Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and Themac Resources

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

The idea behind CVS HEALTH CDR and Themac Resources Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..