Correlation Between Concord Medical and CVS Health

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

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

Diversification Opportunities for Concord Medical and CVS Health

-0.12

Correlation Coefficient

Concord Medical  CVS Health

Good diversification

The 3 months correlation between Concord and CVS is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Concord Medical Services 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 Concord Medical 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 Concord Medical Services 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 Concord Medical i.e., Concord Medical and CVS Health go up and down completely randomly.

Pair Corralation between Concord Medical and CVS Health

Considering the 90-day investment horizon Concord Medical Services is expected to generate 4.16 times more return on investment than CVS Health. However, Concord Medical is 4.16 times more volatile than CVS Health Corp. It trades about 0.17 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.39 per unit of risk. If you would invest  52.00  in Concord Medical Services on January 30, 2024 and sell it today you would earn a total of  13.00  from holding Concord Medical Services or generate 25.0% return on investment over 90 days.

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

Concord Medical Services  vs.  CVS Health Corp

Concord Medical Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Concord Medical Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak fundamental indicators, Concord Medical may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Concord Medical and CVS Health

The main advantage of trading using opposite Concord Medical and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Concord Medical 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.

The idea behind Concord Medical Services and CVS Health 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.