Correlation Between PureTech Health and Cardinal Health

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

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

Diversification Opportunities for PureTech Health and Cardinal Health

0.8

Correlation Coefficient

PureTech Health  Cardinal Health

Very poor diversification

The 3 months correlation between PureTech and Cardinal is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding PureTech Health plc and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and PureTech 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 PureTech Health plc 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 PureTech Health i.e., PureTech Health and Cardinal Health go up and down completely randomly.

Pair Corralation between PureTech Health and Cardinal Health

Assuming the 90 days trading horizon PureTech Health is expected to generate 1.81 times less return on investment than Cardinal Health. In addition to that, PureTech Health is 1.48 times more volatile than Cardinal Health. It trades about 0.04 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.1 per unit of volatility. If you would invest  11,269  in Cardinal Health on August 31, 2024 and sell it today you would earn a total of  1,017  from holding Cardinal Health or generate 9.02% return on investment over 90 days.

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

PureTech Health plc  vs.  Cardinal Health

PureTech Health plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PureTech Health plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PureTech Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cardinal Health

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with PureTech Health and Cardinal Health

The main advantage of trading using opposite PureTech Health and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PureTech Health 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 PureTech Health plc 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.