Correlation Between Target and CVS Health
Can any of the company-specific risk be diversified away by investing in both Target 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 Target and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and CVS Health Corp, you can compare the effects of market volatilities on Target 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 Target with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and CVS Health.
Diversification Opportunities for Target and CVS Health
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Target and CVS is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Target 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 Target 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 Target 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 Target i.e., Target and CVS Health go up and down completely randomly.
Pair Corralation between Target and CVS Health
Considering the 90-day investment horizon Target is expected to generate 0.59 times more return on investment than CVS Health. However, Target is 1.68 times less risky than CVS Health. It trades about -0.18 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 17,264 in Target on January 26, 2024 and sell it today you would lose (730.00) from holding Target or give up 4.23% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Target vs. CVS Health Corp
Performance |
Timeline |
Target |
CVS Health Corp |
Target and CVS Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Target and CVS Health
The main advantage of trading using opposite Target and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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.Target vs. Ingles Markets Incorporated | Target vs. Grocery Outlet Holding | Target vs. Natural Grocers by | Target vs. Tesco PLC |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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