Correlation Between Varex Imaging and CVS Health

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

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

Diversification Opportunities for Varex Imaging and CVS Health

-0.34

Correlation Coefficient

Varex Imaging  CVS Health

Very good diversification

The 3 months correlation between Varex and CVS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Varex Imaging Corp 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 Varex Imaging 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 Varex Imaging 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 Corp has no effect on the direction of Varex Imaging i.e., Varex Imaging and CVS Health go up and down completely randomly.

Pair Corralation between Varex Imaging and CVS Health

Given the investment horizon of 90 days Varex Imaging Corp is expected to generate 1.25 times more return on investment than CVS Health. However, Varex Imaging is 1.25 times more volatile than CVS Health Corp. It trades about -0.01 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.04 per unit of risk. If you would invest  2,012  in Varex Imaging Corp on August 30, 2024 and sell it today you would lose (359.00) from holding Varex Imaging Corp or give up 17.84% of portfolio value over 90 days.

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

Varex Imaging Corp  vs.  CVS Health Corp

Varex Imaging Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Varex Imaging Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Varex Imaging showed solid returns over the last few months and may actually be approaching a breakup point.

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 Varex Imaging and CVS Health

The main advantage of trading using opposite Varex Imaging and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varex Imaging 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 Varex Imaging Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.