Correlation Between Gap, and Cardinal Health

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

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

Diversification Opportunities for Gap, and Cardinal Health

0.71

Correlation Coefficient

Gap,  Cardinal Health

Poor diversification

The 3 months correlation between Gap, and Cardinal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Gap, 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 The Gap, are associated (or correlated) with Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Gap, i.e., Gap, and Cardinal Health go up and down completely randomly.

Pair Corralation between Gap, and Cardinal Health

Considering the 90-day investment horizon The Gap, is expected to generate 1.77 times more return on investment than Cardinal Health. However, Gap, is 1.77 times more volatile than Cardinal Health. It trades about 0.12 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.05 per unit of risk. If you would invest  2,026  in The Gap, on September 15, 2024 and sell it today you would earn a total of  403.00  from holding The Gap, or generate 19.89% return on investment over 90 days.

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

The Gap,  vs.  Cardinal Health

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Gap, and Cardinal Health

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

The idea behind The Gap, and Cardinal Health 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.