Correlation Between AmerisourceBergen and CVS Health
Can any of the company-specific risk be diversified away by investing in both AmerisourceBergen 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 AmerisourceBergen and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AmerisourceBergen and CVS Health Corp, you can compare the effects of market volatilities on AmerisourceBergen 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 AmerisourceBergen with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmerisourceBergen and CVS Health.
Diversification Opportunities for AmerisourceBergen and CVS Health
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AmerisourceBergen and CVS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding AmerisourceBergen 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 AmerisourceBergen 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 AmerisourceBergen 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 AmerisourceBergen i.e., AmerisourceBergen and CVS Health go up and down completely randomly.
Pair Corralation between AmerisourceBergen and CVS Health
Considering the 90-day investment horizon AmerisourceBergen is expected to generate 0.78 times more return on investment than CVS Health. However, AmerisourceBergen is 1.28 times less risky than CVS Health. It trades about 0.07 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.03 per unit of risk. If you would invest 14,110 in AmerisourceBergen on January 19, 2024 and sell it today you would earn a total of 3,888 from holding AmerisourceBergen or generate 27.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 65.05% |
Values | Daily Returns |
AmerisourceBergen vs. CVS Health Corp
Performance |
Timeline |
AmerisourceBergen |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CVS Health Corp |
AmerisourceBergen and CVS Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AmerisourceBergen and CVS Health
The main advantage of trading using opposite AmerisourceBergen and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmerisourceBergen 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.AmerisourceBergen vs. Cardinal Health | AmerisourceBergen vs. Henry Schein | AmerisourceBergen vs. Owens Minor | AmerisourceBergen vs. Patterson Companies |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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