Correlation Between CVS HEALTH and CHEVRON CDR

Can any of the company-specific risk be diversified away by investing in both CVS HEALTH and CHEVRON CDR 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 CHEVRON CDR 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 CHEVRON CDR, you can compare the effects of market volatilities on CVS HEALTH and CHEVRON CDR 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 CHEVRON CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and CHEVRON CDR.

Diversification Opportunities for CVS HEALTH and CHEVRON CDR

0.09

Correlation Coefficient

CVS HEALTH  CHEVRON CDR

Significant diversification

The 3 months correlation between CVS and CHEVRON is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and CHEVRON CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHEVRON CDR 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 CHEVRON CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHEVRON CDR has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and CHEVRON CDR go up and down completely randomly.

Pair Corralation between CVS HEALTH and CHEVRON CDR

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the CHEVRON CDR. In addition to that, CVS HEALTH is 1.31 times more volatile than CHEVRON CDR. It trades about -0.05 of its total potential returns per unit of risk. CHEVRON CDR is currently generating about 0.1 per unit of volatility. If you would invest  1,821  in CHEVRON CDR on April 24, 2025 and sell it today you would earn a total of  154.00  from holding CHEVRON CDR or generate 8.46% return on investment over 90 days.

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

CVS HEALTH CDR  vs.  CHEVRON CDR

CVS HEALTH CDR

Risk-Adjusted Performance

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 very healthy basic indicators, CVS HEALTH is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CHEVRON CDR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHEVRON CDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CHEVRON CDR may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with CVS HEALTH and CHEVRON CDR

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

The idea behind CVS HEALTH CDR and CHEVRON CDR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.