Correlation Between CVS Health and AmerisourceBergen

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

By analyzing existing cross correlation between CVS Health Corp and AmerisourceBergen, you can compare the effects of market volatilities on CVS Health and AmerisourceBergen 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 AmerisourceBergen. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and AmerisourceBergen.

Diversification Opportunities for CVS Health and AmerisourceBergen

-0.32

Correlation Coefficient

CVS Health  AmerisourceBergen

Very good diversification

The 3 months correlation between CVS and AmerisourceBergen is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen 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 Corp are associated (or correlated) with AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of CVS Health i.e., CVS Health and AmerisourceBergen go up and down completely randomly.

Pair Corralation between CVS Health and AmerisourceBergen

If you would invest  5,675  in CVS Health Corp on September 2, 2024 and sell it today you would earn a total of  310.00  from holding CVS Health Corp or generate 5.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

CVS Health Corp  vs.  AmerisourceBergen

CVS Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

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

AmerisourceBergen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmerisourceBergen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, AmerisourceBergen is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CVS Health and AmerisourceBergen

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

The idea behind CVS Health Corp and AmerisourceBergen 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.