Correlation Between CVS Corp and Magellan Health

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

Diversification Opportunities for CVS Corp and Magellan Health

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between CVS Corp and Magellan is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CVS Corp and Magellan Health Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Health and CVS 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 CVS Corp are associated (or correlated) with Magellan Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Health has no effect on the direction of CVS Corp i.e., CVS Corp and Magellan Health go up and down completely randomly.

Pair Corralation between CVS Corp and Magellan Health

Considering the 90-day investment horizon CVS Corp is expected to generate 11.34 times more return on investment than Magellan Health. However, CVS Corp is 11.34 times more volatile than Magellan Health. It trades about 0.05 of its potential returns per unit of risk. Magellan Health is currently generating about 0.04 per unit of risk. If you would invest  7,954  in CVS Corp on April 3, 2022 and sell it today you would earn a total of  1,440  from holding CVS Corp or generate 18.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy51.0%
ValuesDaily Returns

CVS Corp  vs.  Magellan Health Inc

 Performance (%) 
      Timeline 
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.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0242
Payout Ratio
0.24
Last Split Factor
2:1
Forward Annual Dividend Rate
2.2
Dividend Date
2022-05-02
Ex Dividend Date
2022-04-21
Last Split Date
2005-06-07

CVS Corp Price Channel

Magellan Health 
Magellan Performance
0 of 100
Over the last 90 days Magellan Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Magellan Health is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CVS Corp and Magellan Health Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with CVS Corp and Magellan Health

The main advantage of trading using opposite CVS Corp and Magellan Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Corp position performs unexpectedly, Magellan 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 Magellan Health will offset losses from the drop in Magellan Health's long position.
The idea behind CVS Corp and Magellan Health 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 CEO Directory module to screen CEOs from public companies around the world.

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