Correlation Between Cardinal Health and PT Lippo

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

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

Diversification Opportunities for Cardinal Health and PT Lippo

0.66

Correlation Coefficient

Cardinal Health  PT Lippo

Poor diversification

The 3 months correlation between Cardinal and PTLKF is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and PT Lippo Karawaci in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Lippo Karawaci 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 PT Lippo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Lippo Karawaci has no effect on the direction of Cardinal Health i.e., Cardinal Health and PT Lippo go up and down completely randomly.

Pair Corralation between Cardinal Health and PT Lippo

Considering the 90-day investment horizon Cardinal Health is expected to generate 6.9 times less return on investment than PT Lippo. But when comparing it to its historical volatility, Cardinal Health is 1.3 times less risky than PT Lippo. It trades about 0.02 of its potential returns per unit of risk. PT Lippo Karawaci is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.90  in PT Lippo Karawaci on December 4, 2024 and sell it today you would earn a total of  0.10  from holding PT Lippo Karawaci or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Cardinal Health  vs.  PT Lippo Karawaci

Cardinal Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 1 (%) 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 latest stock price confusion, may contribute to short-horizon losses for the traders.

PT Lippo Karawaci

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Lippo Karawaci are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, PT Lippo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cardinal Health and PT Lippo

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

The idea behind Cardinal Health and PT Lippo Karawaci 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.