Correlation Between Cardinal Health and Cars

Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Cars 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 Cardinal Health and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cardinal Health and Cars Inc, you can compare the effects of market volatilities on Cardinal Health and Cars 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 Cardinal Health with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Cars.

Diversification Opportunities for Cardinal Health and Cars

0.15

Correlation Coefficient

Cardinal Health  Cars

Average diversification

The 3 months correlation between Cardinal and Cars is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Cardinal 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 Cardinal Health are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Cardinal Health i.e., Cardinal Health and Cars go up and down completely randomly.

Pair Corralation between Cardinal Health and Cars

Assuming the 90 days trading horizon Cardinal Health is expected to generate 0.47 times more return on investment than Cars. However, Cardinal Health is 2.11 times less risky than Cars. It trades about -0.15 of its potential returns per unit of risk. Cars Inc is currently generating about -0.36 per unit of risk. If you would invest  12,148  in Cardinal Health on September 24, 2024 and sell it today you would lose (463.00) from holding Cardinal Health or give up 3.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	72.73%
Values	Daily Returns

Cardinal Health  vs.  Cars Inc

Cardinal Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cars Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cars is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cardinal Health and Cars

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

The idea behind Cardinal Health and Cars Inc 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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.