Correlation Between W R and CVS Health
Can any of the company-specific risk be diversified away by investing in both W R 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 W R and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between W R Berkley and CVS Health Corp, you can compare the effects of market volatilities on W R 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 W R with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of W R and CVS Health.
Diversification Opportunities for W R and CVS Health
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between WRB and CVS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley 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 W R 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 W R Berkley 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 W R i.e., W R and CVS Health go up and down completely randomly.
Pair Corralation between W R and CVS Health
Considering the 90-day investment horizon W R Berkley is expected to generate 0.85 times more return on investment than CVS Health. However, W R Berkley is 1.17 times less risky than CVS Health. It trades about -0.05 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.07 per unit of risk. If you would invest 8,136 in W R Berkley on January 26, 2024 and sell it today you would lose (351.00) from holding W R Berkley or give up 4.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
W R Berkley vs. CVS Health Corp
Performance |
| Timeline |
| W R Berkley |
| CVS Health Corp |
W R and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with W R and CVS Health
The main advantage of trading using opposite W R and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W R 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 W R Berkley 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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