Correlation Between Cardinal Health and LENSAR

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

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

Diversification Opportunities for Cardinal Health and LENSAR

0.91

Correlation Coefficient

Cardinal Health  LENSAR

Almost no diversification

The 3 months correlation between Cardinal and LENSAR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and LENSAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENSAR Inc 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 LENSAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENSAR Inc has no effect on the direction of Cardinal Health i.e., Cardinal Health and LENSAR go up and down completely randomly.

Pair Corralation between Cardinal Health and LENSAR

Considering the 90-day investment horizon Cardinal Health is expected to generate 6.05 times less return on investment than LENSAR. But when comparing it to its historical volatility, Cardinal Health is 3.27 times less risky than LENSAR. It trades about 0.08 of its potential returns per unit of risk. LENSAR Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  502.00  in LENSAR Inc on September 12, 2024 and sell it today you would earn a total of  255.00  from holding LENSAR Inc or generate 50.8% return on investment over 90 days.

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

Cardinal Health  vs.  LENSAR Inc

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 January 2025.

LENSAR Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and LENSAR

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

The idea behind Cardinal Health and LENSAR Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.