Correlation Between Citigroup and Cardinal Health

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

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

Diversification Opportunities for Citigroup and Cardinal Health

0.36

Correlation Coefficient

Citigroup  Cardinal Health

Weak diversification

The 3 months correlation between Citigroup and Cardinal is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Cardinal Health go up and down completely randomly.

Pair Corralation between Citigroup and Cardinal Health

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.96 times less return on investment than Cardinal Health. In addition to that, Citigroup is 1.79 times more volatile than Cardinal Health. It trades about 0.03 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.23 per unit of volatility. If you would invest  11,742  in Cardinal Health on December 29, 2024 and sell it today you would earn a total of  1,923  from holding Cardinal Health or generate 16.38% return on investment over 90 days.

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

Citigroup  vs.  Cardinal Health

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cardinal Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Cardinal Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Cardinal Health

The main advantage of trading using opposite Citigroup and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .