Correlation Between Alignment Healthcare and CVS Corp

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Can any of the company-specific risk be diversified away by investing in both Alignment Healthcare and CVS Corp 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 Alignment Healthcare and CVS Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alignment Healthcare and CVS Corp, you can compare the effects of market volatilities on Alignment Healthcare and CVS Corp 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 Alignment Healthcare with a short position of CVS Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alignment Healthcare and CVS Corp.

Diversification Opportunities for Alignment Healthcare and CVS Corp

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Alignment and CVS Corp is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alignment Healthcare and CVS Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Corp and Alignment Healthcare 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 Alignment Healthcare are associated (or correlated) with CVS Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Corp has no effect on the direction of Alignment Healthcare i.e., Alignment Healthcare and CVS Corp go up and down completely randomly.

Pair Corralation between Alignment Healthcare and CVS Corp

Given the investment horizon of 90 days Alignment Healthcare is expected to under-perform the CVS Corp. In addition to that, Alignment Healthcare is 3.49 times more volatile than CVS Corp. It trades about -0.19 of its total potential returns per unit of risk. CVS Corp is currently generating about 0.06 per unit of volatility. If you would invest  9,873  in CVS Corp on July 7, 2022 and sell it today you would earn a total of  172.00  from holding CVS Corp or generate 1.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Alignment Healthcare  vs.  CVS Corp

 Performance (%) 
Alignment Healthcare 
Alignment Performance
0 of 100
Over the last 90 days Alignment Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alignment Price Channel

CVS Corp 
CVS Corp Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CVS Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, CVS Corp may actually be approaching a critical reversion point that can send shares even higher in November 2022.

CVS Corp Price Channel

Alignment Healthcare and CVS Corp Volatility Contrast

   Predicted Return Density   

Pair Trading with Alignment Healthcare and CVS Corp

The main advantage of trading using opposite Alignment Healthcare and CVS Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alignment Healthcare position performs unexpectedly, CVS Corp 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 Corp will offset losses from the drop in CVS Corp's long position.
Alignment Healthcare vs. Amazon Inc
The idea behind Alignment Healthcare and CVS 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.
CVS Corp vs. Amazon Inc
Check out your portfolio center. 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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