Correlation Between Amazon and CVS GROUP

Can any of the company-specific risk be diversified away by investing in both Amazon and CVS GROUP 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 Amazon and CVS GROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amazon Inc and CVS GROUP, you can compare the effects of market volatilities on Amazon and CVS GROUP 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 Amazon with a short position of CVS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and CVS GROUP.

Diversification Opportunities for Amazon and CVS GROUP

-0.76

Correlation Coefficient

Amazon  CVS GROUP

Pay attention - limited upside

The 3 months correlation between Amazon and CVS is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and CVS GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS GROUP and Amazon 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 Amazon Inc are associated (or correlated) with CVS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS GROUP has no effect on the direction of Amazon i.e., Amazon and CVS GROUP go up and down completely randomly.

Pair Corralation between Amazon and CVS GROUP

Assuming the 90 days trading horizon Amazon Inc is expected to under-perform the CVS GROUP. In addition to that, Amazon is 1.37 times more volatile than CVS GROUP. It trades about -0.01 of its total potential returns per unit of risk. CVS GROUP is currently generating about 0.07 per unit of volatility. If you would invest  1,080  in CVS GROUP on February 15, 2024 and sell it today you would earn a total of  20.00  from holding CVS GROUP or generate 1.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Amazon Inc  vs.  CVS GROUP

Amazon Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Amazon may actually be approaching a critical reversion point that can send shares even higher in June 2024.

CVS GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Amazon and CVS GROUP

The main advantage of trading using opposite Amazon and CVS GROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, CVS GROUP 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 GROUP will offset losses from the drop in CVS GROUP's long position.

The idea behind Amazon Inc and CVS GROUP 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.