Correlation Between Cardinal Health and ESH Acquisition

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

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

Diversification Opportunities for Cardinal Health and ESH Acquisition

0.52

Correlation Coefficient

Cardinal Health  ESH Acquisition

Very weak diversification

The 3 months correlation between Cardinal and ESH is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and ESH Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESH Acquisition 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 ESH Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESH Acquisition Corp has no effect on the direction of Cardinal Health i.e., Cardinal Health and ESH Acquisition go up and down completely randomly.

Pair Corralation between Cardinal Health and ESH Acquisition

Considering the 90-day investment horizon Cardinal Health is expected to under-perform the ESH Acquisition. In addition to that, Cardinal Health is 3.54 times more volatile than ESH Acquisition Corp. It trades about -0.04 of its total potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.15 per unit of volatility. If you would invest  1,069  in ESH Acquisition Corp on September 20, 2024 and sell it today you would earn a total of  12.00  from holding ESH Acquisition Corp or generate 1.12% return on investment over 90 days.

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

Cardinal Health  vs.  ESH Acquisition Corp

Cardinal Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cardinal Health is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

ESH Acquisition Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health and ESH Acquisition

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

The idea behind Cardinal Health and ESH Acquisition 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.