Correlation Between Cardinal Health and Patterson Companies

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

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

Diversification Opportunities for Cardinal Health and Patterson Companies

0.78

Correlation Coefficient

Cardinal Health  Patterson Companies

Poor diversification

The 3 months correlation between Cardinal and Patterson is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Cardinal Health i.e., Cardinal Health and Patterson Companies go up and down completely randomly.

Pair Corralation between Cardinal Health and Patterson Companies

Considering the 90-day investment horizon Cardinal Health is expected to generate 12.27 times more return on investment than Patterson Companies. However, Cardinal Health is 12.27 times more volatile than Patterson Companies. It trades about 0.22 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.21 per unit of risk. If you would invest  11,742  in Cardinal Health on December 30, 2024 and sell it today you would earn a total of  1,902  from holding Cardinal Health or generate 16.2% return on investment over 90 days.

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

Cardinal Health  vs.  Patterson Companies

Cardinal Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 17 (%) 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.

Patterson Companies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Patterson Companies is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health and Patterson Companies

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

The idea behind Cardinal Health and Patterson Companies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.