Correlation Between Cardinal Health and Bt Brands

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

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

Diversification Opportunities for Cardinal Health and Bt Brands

-0.09

Correlation Coefficient

Cardinal Health  Bt Brands

Good diversification

The 3 months correlation between Cardinal and BTBD is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Cardinal Health i.e., Cardinal Health and Bt Brands go up and down completely randomly.

Pair Corralation between Cardinal Health and Bt Brands

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.34 times more return on investment than Bt Brands. However, Cardinal Health is 2.97 times less risky than Bt Brands. It trades about 0.16 of its potential returns per unit of risk. Bt Brands is currently generating about -0.02 per unit of risk. If you would invest  11,168  in Cardinal Health on October 24, 2024 and sell it today you would earn a total of  1,707  from holding Cardinal Health or generate 15.28% return on investment over 90 days.

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

Cardinal Health  vs.  Bt Brands

Cardinal Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Cardinal Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Bt Brands is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cardinal Health and Bt Brands

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

The idea behind Cardinal Health and Bt Brands 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.