Correlation Between Cardinal Health, and Telefnica

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

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

Diversification Opportunities for Cardinal Health, and Telefnica

0.04

Correlation Coefficient

Cardinal Health,  Telefnica

Significant diversification

The 3 months correlation between Cardinal and Telefnica is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health, and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA 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 Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Cardinal Health, i.e., Cardinal Health, and Telefnica go up and down completely randomly.

Pair Corralation between Cardinal Health, and Telefnica

Assuming the 90 days trading horizon Cardinal Health, is expected to generate 1.31 times more return on investment than Telefnica. However, Cardinal Health, is 1.31 times more volatile than Telefnica SA. It trades about 0.24 of its potential returns per unit of risk. Telefnica SA is currently generating about -0.08 per unit of risk. If you would invest  63,682  in Cardinal Health, on October 5, 2024 and sell it today you would earn a total of  7,818  from holding Cardinal Health, or generate 12.28% 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.  Telefnica SA

Cardinal Health,

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health, are ranked lower than 14 (%) 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.

Telefnica SA

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Telefnica SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telefnica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health, and Telefnica

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

The idea behind Cardinal Health, and Telefnica SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.