Correlation Between Carlsberg and CVS Health

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Can any of the company-specific risk be diversified away by investing in both Carlsberg 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 Carlsberg and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carlsberg AS and CVS Health Corp, you can compare the effects of market volatilities on Carlsberg 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 Carlsberg with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlsberg and CVS Health.

Diversification Opportunities for Carlsberg and CVS Health

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Carlsberg and CVS is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Carlsberg AS 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 Carlsberg 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 Carlsberg AS 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 Carlsberg i.e., Carlsberg and CVS Health go up and down completely randomly.

Pair Corralation between Carlsberg and CVS Health

Assuming the 90 days trading horizon Carlsberg AS is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, Carlsberg AS is 1.41 times less risky than CVS Health. The stock trades about -0.04 of its potential returns per unit of risk. The CVS Health Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,371  in CVS Health Corp on December 30, 2023 and sell it today you would earn a total of  605.00  from holding CVS Health Corp or generate 8.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Carlsberg AS  vs.  CVS Health Corp

 Performance 
       Timeline  
Carlsberg AS 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg AS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carlsberg may actually be approaching a critical reversion point that can send shares even higher in April 2024.
CVS Health Corp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 comparatively stable basic indicators, CVS Health is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Carlsberg and CVS Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Carlsberg and CVS Health

The main advantage of trading using opposite Carlsberg and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlsberg 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 Carlsberg AS and CVS Health Corp 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.
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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