Correlation Between SPDR SP and CVS Health
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and CVS Health Corp, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and CVS Health.
Diversification Opportunities for SPDR SP and CVS Health
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SPDR and CVS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 SPDR SP 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 SPDR SP 500 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 SPDR SP i.e., SPDR SP and CVS Health go up and down completely randomly.
Pair Corralation between SPDR SP and CVS Health
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.4 times more return on investment than CVS Health. However, SPDR SP 500 is 2.52 times less risky than CVS Health. It trades about -0.16 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.34 per unit of risk. If you would invest 51,977 in SPDR SP 500 on January 25, 2024 and sell it today you would lose (1,412) from holding SPDR SP 500 or give up 2.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
SPDR SP 500 vs. CVS Health Corp
Performance |
| Timeline |
| SPDR SP 500 |
| CVS Health Corp |
SPDR SP and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and CVS Health
The main advantage of trading using opposite SPDR SP and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. SPDR MSCI EAFE | SPDR SP vs. SPDR MSCI Emerging | SPDR SP vs. SPDR Russell 1000 | SPDR SP vs. SPDR Russell 1000 |
| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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