Correlation Between Intact Financial and CVS HEALTH

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

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

Diversification Opportunities for Intact Financial and CVS HEALTH

0.11

Correlation Coefficient

Intact Financial  CVS HEALTH

Average diversification

The 3 months correlation between Intact and CVS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Intact Financial Corp and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR and Intact Financial 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 Intact Financial Corp 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 CDR has no effect on the direction of Intact Financial i.e., Intact Financial and CVS HEALTH go up and down completely randomly.

Pair Corralation between Intact Financial and CVS HEALTH

Assuming the 90 days trading horizon Intact Financial Corp is expected to generate 0.25 times more return on investment than CVS HEALTH. However, Intact Financial Corp is 4.07 times less risky than CVS HEALTH. It trades about 0.1 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.01 per unit of risk. If you would invest  2,362  in Intact Financial Corp on September 12, 2024 and sell it today you would earn a total of  88.00  from holding Intact Financial Corp or generate 3.73% return on investment over 90 days.

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

Intact Financial Corp  vs.  CVS HEALTH CDR

Intact Financial Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intact Financial Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Intact Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CVS HEALTH is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Intact Financial and CVS HEALTH

The main advantage of trading using opposite Intact Financial and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intact Financial 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 Intact Financial Corp and CVS HEALTH CDR 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.