Correlation Between Super Micro and CVS HEALTH

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

By analyzing existing cross correlation between Super Micro Computer, and CVS HEALTH CDR, you can compare the effects of market volatilities on Super Micro 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 Super Micro with a short position of CVS HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Super Micro and CVS HEALTH.

Diversification Opportunities for Super Micro and CVS HEALTH

-0.38

Correlation Coefficient

Super Micro  CVS HEALTH

Very good diversification

The 3 months correlation between Super and CVS is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Super Micro Computer, and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR and Super Micro 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 Super Micro Computer, 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 CDR has no effect on the direction of Super Micro i.e., Super Micro and CVS HEALTH go up and down completely randomly.

Pair Corralation between Super Micro and CVS HEALTH

Assuming the 90 days trading horizon Super Micro Computer, is expected to generate 2.31 times more return on investment than CVS HEALTH. However, Super Micro is 2.31 times more volatile than CVS HEALTH CDR. It trades about 0.22 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.04 per unit of risk. If you would invest  1,075  in Super Micro Computer, on May 5, 2025 and sell it today you would earn a total of  807.00  from holding Super Micro Computer, or generate 75.07% return on investment over 90 days.

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

Super Micro Computer,  vs.  CVS HEALTH CDR

Super Micro Computer,

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer, are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Super Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVS HEALTH CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CVS HEALTH is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Super Micro and CVS HEALTH

The main advantage of trading using opposite Super Micro and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super Micro 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 Super Micro Computer, and CVS HEALTH CDR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.