Correlation Between CVS Health and BIONTECH

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

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

Diversification Opportunities for CVS Health and BIONTECH

0.51

Correlation Coefficient

CVS Health  BIONTECH

Very weak diversification

The 3 months correlation between CVS and BIONTECH is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and BIONTECH SE DRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIONTECH SE DRN 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 are associated (or correlated) with BIONTECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIONTECH SE DRN has no effect on the direction of CVS Health i.e., CVS Health and BIONTECH go up and down completely randomly.

Pair Corralation between CVS Health and BIONTECH

Assuming the 90 days trading horizon CVS Health is expected to generate 3.72 times less return on investment than BIONTECH. But when comparing it to its historical volatility, CVS Health is 1.11 times less risky than BIONTECH. It trades about 0.01 of its potential returns per unit of risk. BIONTECH SE DRN is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,237  in BIONTECH SE DRN on September 12, 2024 and sell it today you would earn a total of  1,223  from holding BIONTECH SE DRN or generate 37.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.77%
Values	Daily Returns

CVS Health  vs.  BIONTECH SE DRN

CVS Health

Risk-Adjusted Performance

3 of 100

Modest

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

BIONTECH SE DRN

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BIONTECH SE DRN are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BIONTECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and BIONTECH

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

The idea behind CVS Health and BIONTECH SE DRN 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.