Correlation Between Cardinal Health and Hawkins

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

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

Diversification Opportunities for Cardinal Health and Hawkins

0.55

Correlation Coefficient

Cardinal Health  Hawkins

Very weak diversification

The 3 months correlation between Cardinal and Hawkins is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Cardinal Health i.e., Cardinal Health and Hawkins go up and down completely randomly.

Pair Corralation between Cardinal Health and Hawkins

Considering the 90-day investment horizon Cardinal Health is expected to generate 2.23 times less return on investment than Hawkins. But when comparing it to its historical volatility, Cardinal Health is 1.64 times less risky than Hawkins. It trades about 0.05 of its potential returns per unit of risk. Hawkins is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,755  in Hawkins on September 15, 2024 and sell it today you would earn a total of  1,232  from holding Hawkins or generate 10.48% return on investment over 90 days.

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

Cardinal Health  vs.  Hawkins

Cardinal Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cardinal Health is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Hawkins

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, Hawkins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cardinal Health and Hawkins

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

The idea behind Cardinal Health and Hawkins 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.