Correlation Between CVS Health and GameStop Corp

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

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

Diversification Opportunities for CVS Health and GameStop Corp

-0.26

Correlation Coefficient

CVS Health  GameStop Corp

Very good diversification

The 3 months correlation between CVS and GameStop is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 are associated (or correlated) with GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of CVS Health i.e., CVS Health and GameStop Corp go up and down completely randomly.

Pair Corralation between CVS Health and GameStop Corp

Assuming the 90 days trading horizon CVS Health is expected to generate 0.44 times more return on investment than GameStop Corp. However, CVS Health is 2.29 times less risky than GameStop Corp. It trades about -0.08 of its potential returns per unit of risk. GameStop Corp is currently generating about -0.05 per unit of risk. If you would invest  127,150  in CVS Health on April 23, 2025 and sell it today you would lose (12,024) from holding CVS Health or give up 9.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

CVS Health  vs.  GameStop Corp

CVS Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

GameStop Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days GameStop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CVS Health and GameStop Corp

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

The idea behind CVS Health and GameStop 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.