Correlation Between CVS HEALTH and Wilmington Capital

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

Diversification Opportunities for CVS HEALTH and Wilmington Capital

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between CVS and Wilmington is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Wilmington Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Capital 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 Wilmington Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Capital has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Wilmington Capital go up and down completely randomly.

Pair Corralation between CVS HEALTH and Wilmington Capital

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to generate 1.11 times more return on investment than Wilmington Capital. However, CVS HEALTH is 1.11 times more volatile than Wilmington Capital Management. It trades about 0.02 of its potential returns per unit of risk. Wilmington Capital Management is currently generating about -0.02 per unit of risk. If you would invest  1,427  in CVS HEALTH CDR on September 6, 2024 and sell it today you would earn a total of  18.00  from holding CVS HEALTH CDR or generate 1.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

CVS HEALTH CDR  vs.  Wilmington Capital Management

 Performance 
       Timeline  
CVS HEALTH CDR 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in CVS HEALTH CDR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CVS HEALTH is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Wilmington Capital 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wilmington Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Wilmington Capital is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CVS HEALTH and Wilmington Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CVS HEALTH and Wilmington Capital

The main advantage of trading using opposite CVS HEALTH and Wilmington Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS HEALTH position performs unexpectedly, Wilmington Capital 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 Wilmington Capital will offset losses from the drop in Wilmington Capital's long position.
The idea behind CVS HEALTH CDR and Wilmington Capital Management 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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