Correlation Between Cardinal Health and AW Revenue

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

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

Diversification Opportunities for Cardinal Health and AW Revenue

0.47

Correlation Coefficient

Cardinal Health  AW Revenue

Very weak diversification

The 3 months correlation between Cardinal and AWRRF is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and AW Revenue Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AW Revenue Royalties 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 AW Revenue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AW Revenue Royalties has no effect on the direction of Cardinal Health i.e., Cardinal Health and AW Revenue go up and down completely randomly.

Pair Corralation between Cardinal Health and AW Revenue

Considering the 90-day investment horizon Cardinal Health is expected to generate 2.26 times more return on investment than AW Revenue. However, Cardinal Health is 2.26 times more volatile than AW Revenue Royalties. It trades about 0.16 of its potential returns per unit of risk. AW Revenue Royalties is currently generating about 0.29 per unit of risk. If you would invest  11,176  in Cardinal Health on September 5, 2024 and sell it today you would earn a total of  1,348  from holding Cardinal Health or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	23.81%
Values	Daily Returns

Cardinal Health  vs.  AW Revenue Royalties

Cardinal Health

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AW Revenue Royalties

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days AW Revenue Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, AW Revenue reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and AW Revenue

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

The idea behind Cardinal Health and AW Revenue Royalties 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.