Correlation Between Cardinal Health and GSTechnologies

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

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

Diversification Opportunities for Cardinal Health and GSTechnologies

0.34

Correlation Coefficient

Cardinal Health  GSTechnologies

Weak diversification

The 3 months correlation between Cardinal and GSTechnologies is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and GSTechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSTechnologies 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 GSTechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSTechnologies has no effect on the direction of Cardinal Health i.e., Cardinal Health and GSTechnologies go up and down completely randomly.

Pair Corralation between Cardinal Health and GSTechnologies

Assuming the 90 days trading horizon Cardinal Health is expected to generate 6.18 times less return on investment than GSTechnologies. But when comparing it to its historical volatility, Cardinal Health is 5.92 times less risky than GSTechnologies. It trades about 0.07 of its potential returns per unit of risk. GSTechnologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  57.00  in GSTechnologies on October 4, 2024 and sell it today you would earn a total of  233.00  from holding GSTechnologies or generate 408.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Cardinal Health  vs.  GSTechnologies

Cardinal Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 5 (%) 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 February 2025.

GSTechnologies

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and GSTechnologies

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

The idea behind Cardinal Health and GSTechnologies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .