Correlation Between Cardinal Health and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and NETGEAR 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 NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and NETGEAR, you can compare the effects of market volatilities on Cardinal Health and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and NETGEAR.
Diversification Opportunities for Cardinal Health and NETGEAR
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cardinal and NETGEAR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Cardinal Health i.e., Cardinal Health and NETGEAR go up and down completely randomly.
Pair Corralation between Cardinal Health and NETGEAR
Considering the 90-day investment horizon Cardinal Health is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, Cardinal Health is 1.63 times less risky than NETGEAR. The stock trades about -0.11 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,446 in NETGEAR on September 19, 2024 and sell it today you would earn a total of 122.00 from holding NETGEAR or generate 4.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Cardinal Health vs. NETGEAR
Performance |
Timeline |
Cardinal Health |
NETGEAR |
Cardinal Health and NETGEAR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cardinal Health and NETGEAR
The main advantage of trading using opposite Cardinal Health and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.Cardinal Health vs. ASGN Inc | Cardinal Health vs. Kforce Inc | Cardinal Health vs. Kelly Services A | Cardinal Health vs. Central Garden Pet |
NETGEAR vs. Passage Bio | NETGEAR vs. Black Diamond Therapeutics | NETGEAR vs. Alector | NETGEAR vs. Century Therapeutics |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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