Correlation Between Lennox International and CVS Health
Can any of the company-specific risk be diversified away by investing in both Lennox International 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 Lennox International and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennox International and CVS Health Corp, you can compare the effects of market volatilities on Lennox International 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 Lennox International with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and CVS Health.
Diversification Opportunities for Lennox International and CVS Health
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lennox and CVS is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International 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 Lennox International 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 Lennox International 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 Lennox International i.e., Lennox International and CVS Health go up and down completely randomly.
Pair Corralation between Lennox International and CVS Health
Considering the 90-day investment horizon Lennox International is expected to generate 0.8 times more return on investment than CVS Health. However, Lennox International is 1.25 times less risky than CVS Health. It trades about -0.18 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.32 per unit of risk. If you would invest 48,764 in Lennox International on January 20, 2024 and sell it today you would lose (2,900) from holding Lennox International or give up 5.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lennox International vs. CVS Health Corp
Performance |
| Timeline |
| Lennox International |
| CVS Health Corp |
Lennox International and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennox International and CVS Health
The main advantage of trading using opposite Lennox International and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennox International 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.| Lennox International vs. Gibraltar Industries | Lennox International vs. Travis Perkins plc | Lennox International vs. Travis Perkins PLC | Lennox International vs. Janus International Group |
| CVS Health vs. Certara | CVS Health vs. HealthStream | CVS Health vs. HealthEquity | CVS Health vs. Evolent Health |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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