Correlation Between Alcoa Corp and CVS Health
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and CVS Health Corp, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and CVS Health.
Diversification Opportunities for Alcoa Corp and CVS Health
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alcoa and CVS is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and CVS Health go up and down completely randomly.
Pair Corralation between Alcoa Corp and CVS Health
Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 1.27 times more return on investment than CVS Health. However, Alcoa Corp is 1.27 times more volatile than CVS Health Corp. It trades about 0.25 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.34 per unit of risk. If you would invest 3,186 in Alcoa Corp on January 25, 2024 and sell it today you would earn a total of 422.00 from holding Alcoa Corp or generate 13.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alcoa Corp vs. CVS Health Corp
Performance |
Timeline |
Alcoa Corp |
CVS Health Corp |
Alcoa Corp and CVS Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alcoa Corp and CVS Health
The main advantage of trading using opposite Alcoa Corp and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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.Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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