Correlation Between CVS Health and Intel

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

Diversification Opportunities for CVS Health and Intel

0.84

Correlation Coefficient

CVS Health  Intel

Very poor diversification

The 3 months correlation between CVS and Intel is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of CVS Health i.e., CVS Health and Intel go up and down completely randomly.

Pair Corralation between CVS Health and Intel

Considering the 90-day investment horizon CVS Health Corp is expected to generate 1.0 times more return on investment than Intel. However, CVS Health Corp is 1.0 times less risky than Intel. It trades about -0.14 of its potential returns per unit of risk. Intel is currently generating about -0.19 per unit of risk. If you would invest  7,175  in CVS Health Corp on February 5, 2024 and sell it today you would lose (1,585) from holding CVS Health Corp or give up 22.09% of portfolio value over 90 days.

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

CVS Health Corp  vs.  Intel

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CVS Health and Intel

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

The idea behind CVS Health Corp and Intel 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.