Correlation Between Financial Select and CVS Health
Can any of the company-specific risk be diversified away by investing in both Financial Select 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 Financial Select and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and CVS Health Corp, you can compare the effects of market volatilities on Financial Select 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 Financial Select with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and CVS Health.
Diversification Opportunities for Financial Select and CVS Health
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Financial and CVS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector 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 Financial Select 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 Financial Select Sector 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 Financial Select i.e., Financial Select and CVS Health go up and down completely randomly.
Pair Corralation between Financial Select and CVS Health
Considering the 90-day investment horizon Financial Select Sector is expected to generate 0.5 times more return on investment than CVS Health. However, Financial Select Sector is 2.0 times less risky than CVS Health. It trades about 0.14 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.01 per unit of risk. If you would invest 3,298 in Financial Select Sector on January 25, 2024 and sell it today you would earn a total of 814.00 from holding Financial Select Sector or generate 24.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.52% |
| Values | Daily Returns |
Financial Select Sector vs. CVS Health Corp
Performance |
| Timeline |
| Financial Select Sector |
| CVS Health Corp |
Financial Select and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and CVS Health
The main advantage of trading using opposite Financial Select and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select 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.| Financial Select vs. Merck Company | Financial Select vs. Chevron Corp | Financial Select vs. MagnaChip Semiconductor |
| 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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