Correlation Between CVS Health and Centene Corp
Can any of the company-specific risk be diversified away by investing in both CVS Health and Centene Corp 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 CVS Health and Centene Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health Corp and Centene Corp, you can compare the effects of market volatilities on CVS Health and Centene Corp 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 CVS Health with a short position of Centene Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Centene Corp.
Diversification Opportunities for CVS Health and Centene Corp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CVS and Centene is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Centene Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centene Corp and CVS Health 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 CVS Health Corp are associated (or correlated) with Centene Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centene Corp has no effect on the direction of CVS Health i.e., CVS Health and Centene Corp go up and down completely randomly.
Pair Corralation between CVS Health and Centene Corp
Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the Centene Corp. In addition to that, CVS Health is 1.01 times more volatile than Centene Corp. It trades about -0.29 of its total potential returns per unit of risk. Centene Corp is currently generating about -0.14 per unit of volatility. If you would invest 7,702 in Centene Corp on January 17, 2024 and sell it today you would lose (430.00) from holding Centene Corp or give up 5.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health Corp vs. Centene Corp
Performance |
| Timeline |
| CVS Health Corp |
| Centene Corp |
CVS Health and Centene Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Centene Corp
The main advantage of trading using opposite CVS Health and Centene Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Centene Corp 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 Centene Corp will offset losses from the drop in Centene Corp's long position.| CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
| Centene Corp vs. Humana Inc | Centene Corp vs. Elevance Health | Centene Corp vs. UnitedHealth Group Incorporated | Centene Corp vs. CVS Health 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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