Correlation Between Toro and CVS Health

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

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

Diversification Opportunities for Toro and CVS Health

-0.68

Correlation Coefficient

Toro  CVS Health

Excellent diversification

The 3 months correlation between Toro and CVS is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Toro 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 Toro 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 Toro 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 Toro i.e., Toro and CVS Health go up and down completely randomly.

Pair Corralation between Toro and CVS Health

Considering the 90-day investment horizon Toro Co is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, Toro Co is 1.09 times less risky than CVS Health. The stock trades about -0.13 of its potential returns per unit of risk. The CVS Health Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,131  in CVS Health Corp on January 16, 2025 and sell it today you would earn a total of  1,724  from holding CVS Health Corp or generate 33.6% return on investment over 90 days.

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

Toro Co  vs.  CVS Health Corp

Toro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toro Co 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 May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 15 (%) 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 Toro and CVS Health

The main advantage of trading using opposite Toro and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro 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 Toro 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..