Correlation Between Cardinal Health and Henry Schein

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

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

Diversification Opportunities for Cardinal Health and Henry Schein

0.17

Correlation Coefficient

Cardinal Health  Henry Schein

Average diversification

The 3 months correlation between Cardinal and Henry is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Henry Schein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henry Schein 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 Henry Schein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henry Schein has no effect on the direction of Cardinal Health i.e., Cardinal Health and Henry Schein go up and down completely randomly.

Pair Corralation between Cardinal Health and Henry Schein

Considering the 90-day investment horizon Cardinal Health is expected to generate 1.23 times less return on investment than Henry Schein. But when comparing it to its historical volatility, Cardinal Health is 1.15 times less risky than Henry Schein. It trades about 0.08 of its potential returns per unit of risk. Henry Schein is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,046  in Henry Schein on August 31, 2024 and sell it today you would earn a total of  659.00  from holding Henry Schein or generate 9.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Cardinal Health  vs.  Henry Schein

Cardinal Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Henry Schein

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Henry Schein are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, Henry Schein may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Cardinal Health and Henry Schein

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

The idea behind Cardinal Health and Henry Schein 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.