Correlation Between Cardinal Health and EDAP TMS

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

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

Diversification Opportunities for Cardinal Health and EDAP TMS

-0.51

Correlation Coefficient

Cardinal Health  EDAP TMS

Excellent diversification

The 3 months correlation between Cardinal and EDAP is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and EDAP TMS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDAP TMS SA 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 EDAP TMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDAP TMS SA has no effect on the direction of Cardinal Health i.e., Cardinal Health and EDAP TMS go up and down completely randomly.

Pair Corralation between Cardinal Health and EDAP TMS

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.45 times more return on investment than EDAP TMS. However, Cardinal Health is 2.23 times less risky than EDAP TMS. It trades about 0.1 of its potential returns per unit of risk. EDAP TMS SA is currently generating about -0.17 per unit of risk. If you would invest  11,220  in Cardinal Health on August 30, 2024 and sell it today you would earn a total of  1,043  from holding Cardinal Health or generate 9.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cardinal Health  vs.  EDAP TMS SA

Cardinal Health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

EDAP TMS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDAP TMS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Cardinal Health and EDAP TMS

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

The idea behind Cardinal Health and EDAP TMS SA 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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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.