Correlation Between CVS HEALTH and Caldwell Partners

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

By analyzing existing cross correlation between CVS HEALTH CDR and Caldwell Partners International, you can compare the effects of market volatilities on CVS HEALTH and Caldwell Partners 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 Caldwell Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and Caldwell Partners.

Diversification Opportunities for CVS HEALTH and Caldwell Partners

-0.73

Correlation Coefficient

CVS HEALTH  Caldwell Partners

Pay attention - limited upside

The 3 months correlation between CVS and Caldwell is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Caldwell Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caldwell Partners 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 CDR are associated (or correlated) with Caldwell Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caldwell Partners has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Caldwell Partners go up and down completely randomly.

Pair Corralation between CVS HEALTH and Caldwell Partners

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Caldwell Partners. But the stock apears to be less risky and, when comparing its historical volatility, CVS HEALTH CDR is 2.12 times less risky than Caldwell Partners. The stock trades about -0.08 of its potential returns per unit of risk. The Caldwell Partners International is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Caldwell Partners International on February 26, 2024 and sell it today you would lose (95.00) from holding Caldwell Partners International or give up 54.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.92%
Values	Daily Returns

CVS HEALTH CDR  vs.  Caldwell Partners Internationa

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Caldwell Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Caldwell Partners International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Caldwell Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and Caldwell Partners

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

The idea behind CVS HEALTH CDR and Caldwell Partners International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.