Correlation Between CVS Health and HCA Holdings
Can any of the company-specific risk be diversified away by investing in both CVS Health and HCA Holdings 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 HCA Holdings 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 HCA Holdings, you can compare the effects of market volatilities on CVS Health and HCA Holdings 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 HCA Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and HCA Holdings.
Diversification Opportunities for CVS Health and HCA Holdings
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and HCA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and HCA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Holdings 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 HCA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Holdings has no effect on the direction of CVS Health i.e., CVS Health and HCA Holdings go up and down completely randomly.
Pair Corralation between CVS Health and HCA Holdings
Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the HCA Holdings. In addition to that, CVS Health is 1.41 times more volatile than HCA Holdings. It trades about -0.3 of its total potential returns per unit of risk. HCA Holdings is currently generating about -0.35 per unit of volatility. If you would invest 32,886 in HCA Holdings on January 20, 2024 and sell it today you would lose (3,186) from holding HCA Holdings or give up 9.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health Corp vs. HCA Holdings
Performance |
| Timeline |
| CVS Health Corp |
| HCA Holdings |
CVS Health and HCA Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and HCA Holdings
The main advantage of trading using opposite CVS Health and HCA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, HCA Holdings 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 HCA Holdings will offset losses from the drop in HCA Holdings' long position.| CVS Health vs. Certara | CVS Health vs. HealthStream | CVS Health vs. Evolent Health | CVS Health vs. Streamline Health Solutions |
| HCA Holdings vs. Elevance Health | HCA Holdings vs. Centene Corp | HCA Holdings vs. UnitedHealth Group Incorporated | HCA Holdings vs. CVS Health 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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