Correlation Between Cardinal Health, and Pentair Plc

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

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

Diversification Opportunities for Cardinal Health, and Pentair Plc

0.17

Correlation Coefficient

Cardinal Health,  Pentair Plc

Average diversification

The 3 months correlation between Cardinal and Pentair is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health, and Pentair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair plc and Cardinal Health, 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 Cardinal Health, are associated (or correlated) with Pentair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair plc has no effect on the direction of Cardinal Health, i.e., Cardinal Health, and Pentair Plc go up and down completely randomly.

Pair Corralation between Cardinal Health, and Pentair Plc

Assuming the 90 days trading horizon Cardinal Health, is expected to generate 1.02 times more return on investment than Pentair Plc. However, Cardinal Health, is 1.02 times more volatile than Pentair plc. It trades about 0.15 of its potential returns per unit of risk. Pentair plc is currently generating about 0.11 per unit of risk. If you would invest  63,923  in Cardinal Health, on October 23, 2024 and sell it today you would earn a total of  8,939  from holding Cardinal Health, or generate 13.98% return on investment over 90 days.

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

Cardinal Health,  vs.  Pentair plc

Cardinal Health,

Risk-Adjusted Performance

11 of 100

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.

Pentair plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pentair Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cardinal Health, and Pentair Plc

The main advantage of trading using opposite Cardinal Health, and Pentair Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health, position performs unexpectedly, Pentair Plc 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 Pentair Plc will offset losses from the drop in Pentair Plc's long position.

The idea behind Cardinal Health, and Pentair plc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.