Correlation Between Multiplan Corp and CVS Corp

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Can any of the company-specific risk be diversified away by investing in both Multiplan 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 Multiplan 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 Multiplan Corp and CVS Corp, you can compare the effects of market volatilities on Multiplan 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 Multiplan Corp with a short position of CVS Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multiplan Corp and CVS Corp.

Diversification Opportunities for Multiplan Corp and CVS Corp

-0.78
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Multiplan and CVS Corp is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Multiplan Corp and CVS Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Corp and Multiplan 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 Multiplan 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 Multiplan Corp i.e., Multiplan Corp and CVS Corp go up and down completely randomly.

Pair Corralation between Multiplan Corp and CVS Corp

Given the investment horizon of 90 days Multiplan Corp is expected to under-perform the CVS Corp. In addition to that, Multiplan Corp is 1.87 times more volatile than CVS Corp. It trades about -0.45 of its total potential returns per unit of risk. CVS Corp is currently generating about 0.27 per unit of volatility. If you would invest  9,460  in CVS Corp on May 21, 2022 and sell it today you would earn a total of  904.00  from holding CVS Corp or generate 9.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Multiplan Corp  vs.  CVS Corp

 Performance (%) 
       Timeline  
Multiplan Corp 
Multiplan Performance
0 of 100
Over the last 90 days Multiplan Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in September 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Multiplan Price Channel

CVS Corp 
CVS Corp Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in CVS Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, CVS Corp may actually be approaching a critical reversion point that can send shares even higher in September 2022.

CVS Corp Price Channel

Multiplan Corp and CVS Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Multiplan Corp and CVS Corp

The main advantage of trading using opposite Multiplan Corp and CVS Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multiplan 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.
The idea behind Multiplan 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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