Correlation Between CVS HEALTH and Sabio Holdings

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

Diversification Opportunities for CVS HEALTH and Sabio Holdings

0.4

Correlation Coefficient

CVS HEALTH  Sabio Holdings

Very weak diversification

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

Pair Corralation between CVS HEALTH and Sabio Holdings

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Sabio Holdings. But the stock apears to be less risky and, when comparing its historical volatility, CVS HEALTH CDR is 1.91 times less risky than Sabio Holdings. The stock trades about -0.17 of its potential returns per unit of risk. The Sabio Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Sabio Holdings on September 27, 2024 and sell it today you would earn a total of  2.00  from holding Sabio Holdings or generate 4.17% return on investment over 90 days.

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

CVS HEALTH CDR  vs.  Sabio Holdings

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.

Sabio Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabio Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Sabio Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and Sabio Holdings

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

The idea behind CVS HEALTH CDR and Sabio Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..