Correlation Between Iron Mountain and CVS Health

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

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

Diversification Opportunities for Iron Mountain and CVS Health

0.17

Correlation Coefficient

Iron Mountain  CVS Health

Average diversification

The 3 months correlation between Iron and CVS is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Iron Mountain 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 Iron Mountain Incorporated 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 has no effect on the direction of Iron Mountain i.e., Iron Mountain and CVS Health go up and down completely randomly.

Pair Corralation between Iron Mountain and CVS Health

Assuming the 90 days trading horizon Iron Mountain Incorporated is expected to generate 1.05 times more return on investment than CVS Health. However, Iron Mountain is 1.05 times more volatile than CVS Health. It trades about 0.12 of its potential returns per unit of risk. CVS Health is currently generating about -0.04 per unit of risk. If you would invest  26,054  in Iron Mountain Incorporated on September 24, 2024 and sell it today you would earn a total of  38,206  from holding Iron Mountain Incorporated or generate 146.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	69.87%
Values	Daily Returns

Iron Mountain Incorporated  vs.  CVS Health

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iron Mountain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CVS Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Iron Mountain and CVS Health

The main advantage of trading using opposite Iron Mountain and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Mountain 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 Iron Mountain Incorporated and CVS Health 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.