Correlation Between Gossan Resources and CVS Health

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

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

Diversification Opportunities for Gossan Resources and CVS Health

-0.7

Correlation Coefficient

Gossan Resources  CVS Health

Excellent diversification

The 3 months correlation between Gossan and CVS is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Gossan Resources 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 Gossan Resources 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 Gossan Resources 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 Gossan Resources i.e., Gossan Resources and CVS Health go up and down completely randomly.

Pair Corralation between Gossan Resources and CVS Health

Assuming the 90 days horizon Gossan Resources is expected to generate 6.45 times more return on investment than CVS Health. However, Gossan Resources is 6.45 times more volatile than CVS Health Corp. It trades about 0.14 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.13 per unit of risk. If you would invest  1.45  in Gossan Resources on February 4, 2024 and sell it today you would earn a total of  1.35  from holding Gossan Resources or generate 93.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gossan Resources  vs.  CVS Health Corp

Gossan Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gossan Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gossan Resources reported solid returns over the last few months and may actually be approaching a breakup point.

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gossan Resources and CVS Health

The main advantage of trading using opposite Gossan Resources and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gossan Resources 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 Gossan Resources 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.