Correlation Between CVS Health and Olema Pharmaceuticals

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

Diversification Opportunities for CVS Health and Olema Pharmaceuticals

  Correlation Coefficient

Modest diversification

The 3 months correlation between CVS Health and Olema is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Olema Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olema Pharmaceuticals and CVS Health 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 Health Corp are associated (or correlated) with Olema Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olema Pharmaceuticals has no effect on the direction of CVS Health i.e., CVS Health and Olema Pharmaceuticals go up and down completely randomly.

Pair Corralation between CVS Health and Olema Pharmaceuticals

Considering the 90-day investment horizon CVS Health Corp is expected to generate 0.24 times more return on investment than Olema Pharmaceuticals. However, CVS Health Corp is 4.12 times less risky than Olema Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Olema Pharmaceuticals is currently generating about -0.06 per unit of risk. If you would invest  8,263  in CVS Health Corp on September 3, 2022 and sell it today you would earn a total of  1,995  from holding CVS Health Corp or generate 24.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

CVS Health Corp  vs.  Olema Pharmaceuticals

 Performance (%) 
CVS Health Corp 
CVS Health Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, CVS Health is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

CVS Health Price Channel

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

Olema Price Channel

CVS Health and Olema Pharmaceuticals Volatility Contrast

   Predicted Return Density   

Pair Trading with CVS Health and Olema Pharmaceuticals

The main advantage of trading using opposite CVS Health and Olema Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Olema Pharmaceuticals 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 Olema Pharmaceuticals will offset losses from the drop in Olema Pharmaceuticals' long position.
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The idea behind CVS Health Corp and Olema Pharmaceuticals 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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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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