Correlation Between Ralph Lauren and CVS Health

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

Diversification Opportunities for Ralph Lauren and CVS Health

  Correlation Coefficient

Weak diversification

The 3 months correlation between Ralph and CVS Health is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ralph Lauren Corp and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Ralph Lauren 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 Ralph Lauren Corp are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Ralph Lauren i.e., Ralph Lauren and CVS Health go up and down completely randomly.

Pair Corralation between Ralph Lauren and CVS Health

Allowing for the 90-day total investment horizon Ralph Lauren Corp is expected to generate 2.64 times more return on investment than CVS Health. However, Ralph Lauren is 2.64 times more volatile than CVS Health Corp. It trades about 0.3 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.12 per unit of risk. If you would invest  9,506  in Ralph Lauren Corp on September 5, 2022 and sell it today you would earn a total of  2,050  from holding Ralph Lauren Corp or generate 21.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Ralph Lauren Corp  vs.  CVS Health Corp

 Performance (%) 
Ralph Lauren Corp 
Ralph Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Ralph Lauren revealed solid returns over the last few months and may actually be approaching a breakup point.

Ralph Price Channel

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

CVS Health Price Channel

Ralph Lauren and CVS Health Volatility Contrast

   Predicted Return Density   

Pair Trading with Ralph Lauren and CVS Health

The main advantage of trading using opposite Ralph Lauren and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ralph Lauren position performs unexpectedly, CVS 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 CVS Health will offset losses from the drop in CVS Health's long position.
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The idea behind Ralph Lauren Corp and CVS Health 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.
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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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