Correlation Between CVS Health and MetLife
Can any of the company-specific risk be diversified away by investing in both CVS Health and MetLife 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 MetLife 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 MetLife, you can compare the effects of market volatilities on CVS Health and MetLife 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 MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and MetLife.
Diversification Opportunities for CVS Health and MetLife
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and MetLife is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife 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 MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of CVS Health i.e., CVS Health and MetLife go up and down completely randomly.
Pair Corralation between CVS Health and MetLife
Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the MetLife. In addition to that, CVS Health is 2.06 times more volatile than MetLife. It trades about -0.28 of its total potential returns per unit of risk. MetLife is currently generating about -0.15 per unit of volatility. If you would invest 7,327 in MetLife on January 21, 2024 and sell it today you would lose (216.00) from holding MetLife or give up 2.95% 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. MetLife
Performance |
| Timeline |
| CVS Health Corp |
| MetLife |
CVS Health and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and MetLife
The main advantage of trading using opposite CVS Health and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, MetLife 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 MetLife will offset losses from the drop in MetLife's long position.| CVS Health vs. Certara | CVS Health vs. HealthStream | CVS Health vs. Evolent Health | CVS Health vs. Streamline Health Solutions |
| MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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