Correlation Between Eco Animal and CVS Health

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

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

Diversification Opportunities for Eco Animal and CVS Health

-0.12

Correlation Coefficient

Eco Animal  CVS Health

Good diversification

The 3 months correlation between Eco and CVS is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Eco Animal 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 Eco Animal Health are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Eco Animal i.e., Eco Animal and CVS Health go up and down completely randomly.

Pair Corralation between Eco Animal and CVS Health

Assuming the 90 days trading horizon Eco Animal Health is expected to under-perform the CVS Health. In addition to that, Eco Animal is 1.47 times more volatile than CVS Health Corp. It trades about -0.16 of its total potential returns per unit of risk. CVS Health Corp is currently generating about 0.0 per unit of volatility. If you would invest  5,694  in CVS Health Corp on September 12, 2024 and sell it today you would lose (170.00) from holding CVS Health Corp or give up 2.99% of portfolio value over 90 days.

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

Eco Animal Health  vs.  CVS Health Corp

Eco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Eco Animal and CVS Health

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

The idea behind Eco Animal Health and CVS Health Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.