Correlation Between NORDHEALTH and CVS Health

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

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

Diversification Opportunities for NORDHEALTH and CVS Health

-0.52

Correlation Coefficient

NORDHEALTH  CVS Health

Excellent diversification

The 3 months correlation between NORDHEALTH and CVS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding NORDHEALTH AS NK and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and NORDHEALTH 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 NORDHEALTH AS NK 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 has no effect on the direction of NORDHEALTH i.e., NORDHEALTH and CVS Health go up and down completely randomly.

Pair Corralation between NORDHEALTH and CVS Health

Assuming the 90 days horizon NORDHEALTH AS NK is expected to generate 0.83 times more return on investment than CVS Health. However, NORDHEALTH AS NK is 1.21 times less risky than CVS Health. It trades about -0.03 of its potential returns per unit of risk. CVS Health is currently generating about -0.21 per unit of risk. If you would invest  275.00  in NORDHEALTH AS NK on February 13, 2024 and sell it today you would lose (9.00) from holding NORDHEALTH AS NK or give up 3.27% of portfolio value over 90 days.

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

NORDHEALTH AS NK  vs.  CVS Health

NORDHEALTH AS NK

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NORDHEALTH AS NK are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NORDHEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

CVS Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NORDHEALTH and CVS Health

The main advantage of trading using opposite NORDHEALTH and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORDHEALTH 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 NORDHEALTH AS NK and CVS Health 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.