Correlation Between Check Point and Cardinal Health

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

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

Diversification Opportunities for Check Point and Cardinal Health

-0.55

Correlation Coefficient

Check Point  Cardinal Health

Excellent diversification

The 3 months correlation between Check and Cardinal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Check Point 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 Check Point Software 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 Check Point i.e., Check Point and Cardinal Health go up and down completely randomly.

Pair Corralation between Check Point and Cardinal Health

Assuming the 90 days trading horizon Check Point Software is expected to generate 1.0 times more return on investment than Cardinal Health. However, Check Point is 1.0 times more volatile than Cardinal Health. It trades about 0.2 of its potential returns per unit of risk. Cardinal Health is currently generating about -0.09 per unit of risk. If you would invest  18,069  in Check Point Software on September 27, 2024 and sell it today you would earn a total of  896.00  from holding Check Point Software or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Check Point Software  vs.  Cardinal Health

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Check Point 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 January 2025.

Pair Trading with Check Point and Cardinal Health

The main advantage of trading using opposite Check Point and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point 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 Check Point Software 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.