Correlation Between Laboratory and CVS Health

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Can any of the company-specific risk be diversified away by investing in both Laboratory 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 Laboratory and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Laboratory and CVS Health Corp, you can compare the effects of market volatilities on Laboratory 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 Laboratory with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laboratory and CVS Health.

Diversification Opportunities for Laboratory and CVS Health

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Laboratory and CVS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory Of 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 Laboratory 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 Laboratory 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 Laboratory i.e., Laboratory and CVS Health go up and down completely randomly.

Pair Corralation between Laboratory and CVS Health

Allowing for the 90-day total investment horizon Laboratory is expected to generate 0.73 times more return on investment than CVS Health. However, Laboratory is 1.38 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 0.03 per unit of risk. If you would invest  19,548  in Laboratory on December 30, 2023 and sell it today you would earn a total of  2,298  from holding Laboratory or generate 11.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Laboratory Of  vs.  CVS Health Corp

 Performance 
       Timeline  
Laboratory 

Risk-Adjusted Performance

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Over the last 90 days Laboratory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
CVS Health Corp 

Risk-Adjusted Performance

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Low
 
High
Weak
Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CVS Health is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Laboratory and CVS Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Laboratory and CVS Health

The main advantage of trading using opposite Laboratory and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laboratory 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 Laboratory 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.
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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