Correlation Between CVS Health and SentinelOne

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

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

Diversification Opportunities for CVS Health and SentinelOne

0.17

Correlation Coefficient

CVS Health  SentinelOne

Average diversification

The 3 months correlation between CVS and SentinelOne is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and SentinelOne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SentinelOne 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 Corp are associated (or correlated) with SentinelOne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SentinelOne has no effect on the direction of CVS Health i.e., CVS Health and SentinelOne go up and down completely randomly.

Pair Corralation between CVS Health and SentinelOne

Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the SentinelOne. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 1.15 times less risky than SentinelOne. The stock trades about -0.31 of its potential returns per unit of risk. The SentinelOne is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  2,285  in SentinelOne on January 19, 2024 and sell it today you would lose (222.00) from holding SentinelOne or give up 9.72% of portfolio value over 90 days.

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

CVS Health Corp  vs.  SentinelOne

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 comparatively stable basic indicators, CVS Health is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CVS Health and SentinelOne

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

The idea behind CVS Health Corp and SentinelOne 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.