Correlation Between Cardinal Health and First

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

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

Diversification Opportunities for Cardinal Health and First

0.52

Correlation Coefficient

Cardinal Health  First

Very weak diversification

The 3 months correlation between Cardinal and First is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and First Class Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Class Metals 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 First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Class Metals has no effect on the direction of Cardinal Health i.e., Cardinal Health and First go up and down completely randomly.

Pair Corralation between Cardinal Health and First

Assuming the 90 days trading horizon Cardinal Health is expected to generate 0.29 times more return on investment than First. However, Cardinal Health is 3.43 times less risky than First. It trades about 0.04 of its potential returns per unit of risk. First Class Metals is currently generating about -0.25 per unit of risk. If you would invest  12,054  in Cardinal Health on October 11, 2024 and sell it today you would earn a total of  96.00  from holding Cardinal Health or generate 0.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Cardinal Health  vs.  First Class Metals

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 uncertain basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Class Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cardinal Health and First

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

The idea behind Cardinal Health and First Class Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.