Correlation Between Cardinal Health and Catalent

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

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

Diversification Opportunities for Cardinal Health and Catalent

0.11

Correlation Coefficient

Cardinal Health  Catalent

Average diversification

The 3 months correlation between Cardinal and Catalent is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Cardinal Health i.e., Cardinal Health and Catalent go up and down completely randomly.

Pair Corralation between Cardinal Health and Catalent

Considering the 90-day investment horizon Cardinal Health is expected to under-perform the Catalent. In addition to that, Cardinal Health is 1.79 times more volatile than Catalent. It trades about -0.14 of its total potential returns per unit of risk. Catalent is currently generating about 0.37 per unit of volatility. If you would invest  6,129  in Catalent on September 24, 2024 and sell it today you would earn a total of  219.00  from holding Catalent or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

Cardinal Health  vs.  Catalent

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. Despite fairly inconsistent basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Catalent

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent 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 Catalent

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

The idea behind Cardinal Health and Catalent 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.