Correlation Between Cardinal Health and BTU Metals

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

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

Diversification Opportunities for Cardinal Health and BTU Metals

0.45

Correlation Coefficient

Cardinal Health  BTU Metals

Very weak diversification

The 3 months correlation between Cardinal and BTU is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and BTU Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTU Metals Corp 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 BTU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTU Metals Corp has no effect on the direction of Cardinal Health i.e., Cardinal Health and BTU Metals go up and down completely randomly.

Pair Corralation between Cardinal Health and BTU Metals

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.56 times more return on investment than BTU Metals. However, Cardinal Health is 1.79 times less risky than BTU Metals. It trades about 0.17 of its potential returns per unit of risk. BTU Metals Corp is currently generating about 0.04 per unit of risk. If you would invest  11,040  in Cardinal Health on October 26, 2024 and sell it today you would earn a total of  1,890  from holding Cardinal Health or generate 17.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

Cardinal Health  vs.  BTU Metals Corp

Cardinal Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 13 (%) 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.

BTU Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BTU Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, BTU Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cardinal Health and BTU Metals

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

The idea behind Cardinal Health and BTU Metals Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.