Correlation Between AvalonBay Communities and Cardinal Health,

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

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

Diversification Opportunities for AvalonBay Communities and Cardinal Health,

-0.7

Correlation Coefficient

AvalonBay Communities  Cardinal Health,

Excellent diversification

The 3 months correlation between AvalonBay and Cardinal is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding AvalonBay Communities and Cardinal Health, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health, and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities i.e., AvalonBay Communities and Cardinal Health, go up and down completely randomly.

Pair Corralation between AvalonBay Communities and Cardinal Health,

Assuming the 90 days trading horizon AvalonBay Communities is expected to under-perform the Cardinal Health,. In addition to that, AvalonBay Communities is 1.36 times more volatile than Cardinal Health,. It trades about -0.08 of its total potential returns per unit of risk. Cardinal Health, is currently generating about 0.15 per unit of volatility. If you would invest  63,682  in Cardinal Health, on December 25, 2024 and sell it today you would earn a total of  9,118  from holding Cardinal Health, or generate 14.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

AvalonBay Communities  vs.  Cardinal Health,

AvalonBay Communities

Risk-Adjusted Performance

Very Weak

Over the last 90 days AvalonBay Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cardinal Health,

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health, are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cardinal Health, sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AvalonBay Communities and Cardinal Health,

The main advantage of trading using opposite AvalonBay Communities and Cardinal Health, positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AvalonBay Communities 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 AvalonBay Communities 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.