Correlation Between Barings BDC and Cardinal Health

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

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

Diversification Opportunities for Barings BDC and Cardinal Health

0.59

Correlation Coefficient

Barings BDC  Cardinal Health

Very weak diversification

The 3 months correlation between Barings and Cardinal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and Cardinal Health go up and down completely randomly.

Pair Corralation between Barings BDC and Cardinal Health

Given the investment horizon of 90 days Barings BDC is expected to under-perform the Cardinal Health. But the stock apears to be less risky and, when comparing its historical volatility, Barings BDC is 1.5 times less risky than Cardinal Health. The stock trades about -0.03 of its potential returns per unit of risk. The Cardinal Health is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,969  in Cardinal Health on September 24, 2024 and sell it today you would earn a total of  866.00  from holding Cardinal Health or generate 7.89% return on investment over 90 days.

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

Barings BDC  vs.  Cardinal Health

Barings BDC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barings BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Cardinal Health

Risk-Adjusted Performance

6 of 100

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. Despite fairly inconsistent basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barings BDC and Cardinal Health

The main advantage of trading using opposite Barings BDC and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings BDC 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 Barings BDC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.