Correlation Between CVS Health and Accuray Incorporated

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

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

Diversification Opportunities for CVS Health and Accuray Incorporated

0.92

Correlation Coefficient

CVS Health  Accuray Incorporated

Almost no diversification

The 3 months correlation between CVS and Accuray is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Accuray Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accuray Incorporated and CVS Health 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 CVS Health Corp are associated (or correlated) with Accuray Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accuray Incorporated has no effect on the direction of CVS Health i.e., CVS Health and Accuray Incorporated go up and down completely randomly.

Pair Corralation between CVS Health and Accuray Incorporated

Considering the 90-day investment horizon CVS Health Corp is expected to generate 0.57 times more return on investment than Accuray Incorporated. However, CVS Health Corp is 1.75 times less risky than Accuray Incorporated. It trades about -0.12 of its potential returns per unit of risk. Accuray Incorporated is currently generating about -0.1 per unit of risk. If you would invest  7,569  in CVS Health Corp on March 14, 2024 and sell it today you would lose (1,569) from holding CVS Health Corp or give up 20.73% of portfolio value over 90 days.

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

CVS Health Corp  vs.  Accuray Incorporated

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Accuray Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Accuray Incorporated 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 fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CVS Health and Accuray Incorporated

The main advantage of trading using opposite CVS Health and Accuray Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Accuray Incorporated 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 Accuray Incorporated will offset losses from the drop in Accuray Incorporated's long position.

The idea behind CVS Health Corp and Accuray Incorporated 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.