Correlation Between Westaim Corp and CVS HEALTH

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

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

Diversification Opportunities for Westaim Corp and CVS HEALTH

-0.31

Correlation Coefficient

Westaim Corp  CVS HEALTH

Very good diversification

The 3 months correlation between Westaim and CVS is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Westaim 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 Westaim Corp 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 Westaim 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 Westaim Corp i.e., Westaim Corp and CVS HEALTH go up and down completely randomly.

Pair Corralation between Westaim Corp and CVS HEALTH

Assuming the 90 days horizon Westaim Corp is expected to generate 1.02 times more return on investment than CVS HEALTH. However, Westaim Corp is 1.02 times more volatile than CVS HEALTH CDR. It trades about 0.18 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  399.00  in Westaim Corp on September 12, 2024 and sell it today you would earn a total of  125.00  from holding Westaim Corp or generate 31.33% return on investment over 90 days.

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

Westaim Corp  vs.  CVS HEALTH CDR

Westaim Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Westaim Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Westaim Corp showed solid returns over the last few months and may actually be approaching a breakup point.

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 Westaim Corp and CVS HEALTH

The main advantage of trading using opposite Westaim Corp and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westaim Corp 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 Westaim 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.