Correlation Between CVS Health and United Parcel
Can any of the company-specific risk be diversified away by investing in both CVS Health and United Parcel 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 United Parcel 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 United Parcel Service, you can compare the effects of market volatilities on CVS Health and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and United Parcel.
Diversification Opportunities for CVS Health and United Parcel
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and United is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of CVS Health i.e., CVS Health and United Parcel go up and down completely randomly.
Pair Corralation between CVS Health and United Parcel
Considering the 90-day investment horizon CVS Health is expected to generate 2.26 times less return on investment than United Parcel. But when comparing it to its historical volatility, CVS Health Corp is 1.11 times less risky than United Parcel. It trades about 0.03 of its potential returns per unit of risk. United Parcel Service is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 13,179 in United Parcel Service on January 25, 2024 and sell it today you would earn a total of 1,483 from holding United Parcel Service or generate 11.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health Corp vs. United Parcel Service
Performance |
| Timeline |
| CVS Health Corp |
| United Parcel Service |
CVS Health and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and United Parcel
The main advantage of trading using opposite CVS Health and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
| United Parcel vs. GXO Logistics | United Parcel vs. JB Hunt Transport | United Parcel vs. Expeditors International of | United Parcel vs. CH Robinson Worldwide |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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