Correlation Between TRIMBLE and Cardinal Health

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

By analyzing existing cross correlation between TRIMBLE INC 475 and Cardinal Health, you can compare the effects of market volatilities on TRIMBLE 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 TRIMBLE with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRIMBLE and Cardinal Health.

Diversification Opportunities for TRIMBLE and Cardinal Health

0.05

Correlation Coefficient

TRIMBLE  Cardinal Health

Significant diversification

The 3 months correlation between TRIMBLE and Cardinal is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding TRIMBLE INC 475 and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and TRIMBLE 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 TRIMBLE INC 475 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 TRIMBLE i.e., TRIMBLE and Cardinal Health go up and down completely randomly.

Pair Corralation between TRIMBLE and Cardinal Health

Assuming the 90 days trading horizon TRIMBLE INC 475 is expected to generate 0.86 times more return on investment than Cardinal Health. However, TRIMBLE INC 475 is 1.17 times less risky than Cardinal Health. It trades about 0.71 of its potential returns per unit of risk. Cardinal Health is currently generating about -0.12 per unit of risk. If you would invest  9,848  in TRIMBLE INC 475 on September 29, 2024 and sell it today you would earn a total of  120.00  from holding TRIMBLE INC 475 or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	10.0%
Values	Daily Returns

TRIMBLE INC 475  vs.  Cardinal Health

TRIMBLE INC 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRIMBLE INC 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TRIMBLE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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. Despite fairly inconsistent basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TRIMBLE and Cardinal Health

The main advantage of trading using opposite TRIMBLE and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRIMBLE 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 TRIMBLE INC 475 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.