Correlation Between Cardinal Health and NH Foods

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

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

Diversification Opportunities for Cardinal Health and NH Foods

0.0

Correlation Coefficient

Cardinal Health  NH Foods

Pay attention - limited upside

The 3 months correlation between Cardinal and NIPMY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods 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 NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Cardinal Health i.e., Cardinal Health and NH Foods go up and down completely randomly.

Pair Corralation between Cardinal Health and NH Foods

Considering the 90-day investment horizon Cardinal Health is expected to generate 2.43 times more return on investment than NH Foods. However, Cardinal Health is 2.43 times more volatile than NH Foods Ltd. It trades about 0.05 of its potential returns per unit of risk. NH Foods Ltd is currently generating about 0.09 per unit of risk. If you would invest  9,922  in Cardinal Health on September 19, 2024 and sell it today you would earn a total of  1,714  from holding Cardinal Health or generate 17.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Cardinal Health  vs.  NH Foods Ltd

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 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.

NH Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NH Foods Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, NH Foods 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 NH Foods

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

The idea behind Cardinal Health and NH Foods Ltd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.