Correlation Between Cardinal Health and Gentex

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

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

Diversification Opportunities for Cardinal Health and Gentex

0.2

Correlation Coefficient

Cardinal Health  Gentex

Modest diversification

The 3 months correlation between Cardinal and Gentex is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Cardinal Health i.e., Cardinal Health and Gentex go up and down completely randomly.

Pair Corralation between Cardinal Health and Gentex

Considering the 90-day investment horizon Cardinal Health is expected to generate 1.05 times more return on investment than Gentex. However, Cardinal Health is 1.05 times more volatile than Gentex. It trades about 0.07 of its potential returns per unit of risk. Gentex is currently generating about -0.02 per unit of risk. If you would invest  11,133  in Cardinal Health on September 23, 2024 and sell it today you would earn a total of  695.00  from holding Cardinal Health or generate 6.24% return on investment over 90 days.

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

Cardinal Health  vs.  Gentex

Cardinal Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 5 (%) 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.

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gentex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health and Gentex

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

The idea behind Cardinal Health and Gentex 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.