Correlation Between Sound Shore and CVS Health
Can any of the company-specific risk be diversified away by investing in both Sound Shore 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 Sound Shore and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Shore Fund and CVS Health Corp, you can compare the effects of market volatilities on Sound Shore 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 Sound Shore with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Shore and CVS Health.
Diversification Opportunities for Sound Shore and CVS Health
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sound and CVS is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sound Shore Fund 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 Sound Shore 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 Sound Shore Fund 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 Sound Shore i.e., Sound Shore and CVS Health go up and down completely randomly.
Pair Corralation between Sound Shore and CVS Health
Assuming the 90 days horizon Sound Shore Fund is expected to generate 0.4 times more return on investment than CVS Health. However, Sound Shore Fund is 2.5 times less risky than CVS Health. It trades about -0.24 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.28 per unit of risk. If you would invest 4,528 in Sound Shore Fund on January 21, 2024 and sell it today you would lose (178.00) from holding Sound Shore Fund or give up 3.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sound Shore Fund vs. CVS Health Corp
Performance |
| Timeline |
| Sound Shore Fund |
| CVS Health Corp |
Sound Shore and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Shore and CVS Health
The main advantage of trading using opposite Sound Shore and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Shore 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.| Sound Shore vs. Liberty All Star | Sound Shore vs. Blackrock Midcap Index | Sound Shore vs. Vanguard Energy Fund | Sound Shore vs. Morningstar Unconstrained Allocation |
| CVS Health vs. Certara | CVS Health vs. HealthStream | CVS Health vs. Evolent Health | CVS Health vs. Streamline Health Solutions |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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