Correlation Between Elbit Med and CVS Health
Can any of the company-specific risk be diversified away by investing in both Elbit Med 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 Elbit Med and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elbit Med Tech and CVS Health Corp, you can compare the effects of market volatilities on Elbit Med 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 Elbit Med with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elbit Med and CVS Health.
Diversification Opportunities for Elbit Med and CVS Health
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elbit and CVS is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Elbit Med Tech 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 Elbit Med 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 Elbit Med Tech 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 Elbit Med i.e., Elbit Med and CVS Health go up and down completely randomly.
Pair Corralation between Elbit Med and CVS Health
Assuming the 90 days trading horizon Elbit Med Tech is expected to under-perform the CVS Health. In addition to that, Elbit Med is 4.76 times more volatile than CVS Health Corp. It trades about -0.29 of its total potential returns per unit of risk. CVS Health Corp is currently generating about -0.34 per unit of volatility. If you would invest 7,822 in CVS Health Corp on January 25, 2024 and sell it today you would lose (1,033) from holding CVS Health Corp or give up 13.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
Elbit Med Tech vs. CVS Health Corp
Performance |
| Timeline |
| Elbit Med Tech |
| CVS Health Corp |
Elbit Med and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elbit Med and CVS Health
The main advantage of trading using opposite Elbit Med and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elbit Med 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 Elbit Med Tech 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.| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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