Correlation Between Eastern and CVS Health

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

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

Diversification Opportunities for Eastern and CVS Health

-0.41

Correlation Coefficient

Eastern  CVS Health

Very good diversification

The 3 months correlation between Eastern and CVS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co 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 Eastern 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 Eastern Co 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 Eastern i.e., Eastern and CVS Health go up and down completely randomly.

Pair Corralation between Eastern and CVS Health

Considering the 90-day investment horizon Eastern Co is expected to under-perform the CVS Health. In addition to that, Eastern is 1.02 times more volatile than CVS Health Corp. It trades about -0.19 of its total potential returns per unit of risk. CVS Health Corp is currently generating about 0.17 per unit of volatility. If you would invest  5,196  in CVS Health Corp on January 17, 2025 and sell it today you would earn a total of  1,533  from holding CVS Health Corp or generate 29.5% return on investment over 90 days.

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

Eastern Co  vs.  CVS Health Corp

Eastern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

CVS Health Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CVS Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern and CVS Health

The main advantage of trading using opposite Eastern and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.