Correlation Between MSP Recovery and CVS Health

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

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

Diversification Opportunities for MSP Recovery and CVS Health

-0.59

Correlation Coefficient

MSP Recovery  CVS Health

Excellent diversification

The 3 months correlation between MSP and CVS is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding MSP Recovery 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 MSP Recovery 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 MSP Recovery 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 MSP Recovery i.e., MSP Recovery and CVS Health go up and down completely randomly.

Pair Corralation between MSP Recovery and CVS Health

Given the investment horizon of 90 days MSP Recovery is expected to generate 7.99 times more return on investment than CVS Health. However, MSP Recovery is 7.99 times more volatile than CVS Health Corp. It trades about 0.19 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.36 per unit of risk. If you would invest  67.00  in MSP Recovery on February 1, 2024 and sell it today you would earn a total of  32.00  from holding MSP Recovery or generate 47.76% return on investment over 90 days.

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

MSP Recovery  vs.  CVS Health Corp

MSP Recovery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MSP Recovery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, MSP Recovery showed 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. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MSP Recovery and CVS Health

The main advantage of trading using opposite MSP Recovery and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSP Recovery 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 MSP Recovery 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.