Correlation Between Best Buy and CVS Health
Can any of the company-specific risk be diversified away by investing in both Best Buy 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 Best Buy and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Best Buy Co and CVS Health Corp, you can compare the effects of market volatilities on Best Buy 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 Best Buy with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Best Buy and CVS Health.
Diversification Opportunities for Best Buy and CVS Health
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Best and CVS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co 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 Best Buy 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 Best Buy Co 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 Best Buy i.e., Best Buy and CVS Health go up and down completely randomly.
Pair Corralation between Best Buy and CVS Health
Considering the 90-day investment horizon Best Buy Co is expected to generate 1.39 times more return on investment than CVS Health. However, Best Buy is 1.39 times more volatile than CVS Health Corp. It trades about 0.0 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 8,880 in Best Buy Co on January 24, 2024 and sell it today you would lose (1,368) from holding Best Buy Co or give up 15.41% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Best Buy Co vs. CVS Health Corp
Performance |
Timeline |
Best Buy |
CVS Health Corp |
Best Buy and CVS Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Best Buy and CVS Health
The main advantage of trading using opposite Best Buy and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy 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.Best Buy vs. Target | Best Buy vs. Walmart | Best Buy vs. Aquagold International | Best Buy vs. Thrivent High Yield |
CVS Health vs. Humana Inc | CVS Health vs. Cigna Corp | CVS Health vs. Elevance Health | CVS Health vs. Centene Corp |
Check out your portfolio center.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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