Correlation Between Cardinal Health and AstraZeneca PLC

Can any of the company-specific risk be diversified away by investing in both Cardinal Health and AstraZeneca 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 AstraZeneca 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 AstraZeneca PLC ADR, you can compare the effects of market volatilities on Cardinal Health and AstraZeneca 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and AstraZeneca PLC.

Diversification Opportunities for Cardinal Health and AstraZeneca PLC

0.67

Correlation Coefficient

Cardinal Health  AstraZeneca PLC

Poor diversification

The 3 months correlation between Cardinal and AstraZeneca is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Cardinal Health i.e., Cardinal Health and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Cardinal Health and AstraZeneca PLC

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.97 times more return on investment than AstraZeneca PLC. However, Cardinal Health is 1.03 times less risky than AstraZeneca PLC. It trades about 0.21 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.16 per unit of risk. If you would invest  11,863  in Cardinal Health on December 27, 2024 and sell it today you would earn a total of  1,804  from holding Cardinal Health or generate 15.21% return on investment over 90 days.

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

Cardinal Health  vs.  AstraZeneca PLC ADR

Cardinal Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 16 (%) 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.

AstraZeneca PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, AstraZeneca PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cardinal Health and AstraZeneca PLC

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

The idea behind Cardinal Health and AstraZeneca PLC ADR 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 CEOs Directory module to screen CEOs from public companies around the world.