Correlation Between Aeorema Communications and Cardinal Health

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

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

Diversification Opportunities for Aeorema Communications and Cardinal Health

-0.9

Correlation Coefficient

Aeorema Communications  Cardinal Health

Pay attention - limited upside

The 3 months correlation between Aeorema and Cardinal is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Aeorema Communications 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 Aeorema Communications Plc 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 Aeorema Communications i.e., Aeorema Communications and Cardinal Health go up and down completely randomly.

Pair Corralation between Aeorema Communications and Cardinal Health

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to under-perform the Cardinal Health. In addition to that, Aeorema Communications is 1.41 times more volatile than Cardinal Health. It trades about -0.11 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.08 per unit of volatility. If you would invest  12,172  in Cardinal Health on November 29, 2024 and sell it today you would earn a total of  635.00  from holding Cardinal Health or generate 5.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aeorema Communications Plc  vs.  Cardinal Health

Aeorema Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeorema Communications Plc 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.

Cardinal Health

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cardinal Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aeorema Communications and Cardinal Health

The main advantage of trading using opposite Aeorema Communications and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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 Aeorema Communications Plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.