Correlation Between Empire State and CVS Health

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

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

Diversification Opportunities for Empire State and CVS Health

0.47

Correlation Coefficient

Empire State  CVS Health

Very weak diversification

The 3 months correlation between Empire and CVS is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty 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 Empire State 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 Empire State Realty 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 Empire State i.e., Empire State and CVS Health go up and down completely randomly.

Pair Corralation between Empire State and CVS Health

Given the investment horizon of 90 days Empire State Realty is expected to generate 0.68 times more return on investment than CVS Health. However, Empire State Realty is 1.47 times less risky than CVS Health. It trades about 0.09 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.02 per unit of risk. If you would invest  945.00  in Empire State Realty on September 1, 2024 and sell it today you would earn a total of  151.00  from holding Empire State Realty or generate 15.98% return on investment over 90 days.

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

Empire State Realty  vs.  CVS Health Corp

Empire State Realty

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empire State is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 December 2024.

Pair Trading with Empire State and CVS Health

The main advantage of trading using opposite Empire State and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State 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 Empire State Realty 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.