Correlation Between Centene Corp and CVS Corp

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

Diversification Opportunities for Centene Corp and CVS Corp

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Centene and CVS Corp is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Centene Corp and CVS Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Corp and Centene Corp 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 Centene Corp 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 Centene Corp i.e., Centene Corp and CVS Corp go up and down completely randomly.

Pair Corralation between Centene Corp and CVS Corp

Considering the 90-day investment horizon Centene Corp is expected to generate 0.98 times more return on investment than CVS Corp. However, Centene Corp is 1.02 times less risky than CVS Corp. It trades about 0.02 of its potential returns per unit of risk. CVS Corp is currently generating about -0.13 per unit of risk. If you would invest  8,441  in Centene Corp on February 21, 2022 and sell it today you would earn a total of  55.00  from holding Centene Corp or generate 0.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Centene Corp  vs.  CVS Corp

 Performance (%) 
      Timeline 
Centene Corp 
Centene Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Centene Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Centene Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Centene Price Channel

CVS Corp 
CVS Corp Performance
0 of 100
Over the last 90 days CVS Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CVS Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

CVS Corp Price Channel

Centene Corp and CVS Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Centene Corp and CVS Corp

The main advantage of trading using opposite Centene Corp and CVS Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centene Corp 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.

Centene Corp

Pair trading matchups for Centene Corp

The idea behind Centene Corp 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.
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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