Correlation Between Cardinal Health and Varca Ventures

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

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

Diversification Opportunities for Cardinal Health and Varca Ventures

0.0

Correlation Coefficient

Cardinal Health  Varca Ventures

Pay attention - limited upside

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

Pair Corralation between Cardinal Health and Varca Ventures

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.27 times more return on investment than Varca Ventures. However, Cardinal Health is 3.68 times less risky than Varca Ventures. It trades about 0.08 of its potential returns per unit of risk. Varca Ventures is currently generating about 0.02 per unit of risk. If you would invest  7,408  in Cardinal Health on September 4, 2024 and sell it today you would earn a total of  4,839  from holding Cardinal Health or generate 65.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cardinal Health  vs.  Varca Ventures

Cardinal Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Varca Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varca Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Varca Ventures is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cardinal Health and Varca Ventures

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

The idea behind Cardinal Health and Varca Ventures 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.