Correlation Between Cardinal Health and Retractable Technologies

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

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

Diversification Opportunities for Cardinal Health and Retractable Technologies

0.7

Correlation Coefficient

Cardinal Health  Retractable Technologies

Poor diversification

The 3 months correlation between Cardinal and Retractable is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Retractable Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retractable Technologies 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 Retractable Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retractable Technologies has no effect on the direction of Cardinal Health i.e., Cardinal Health and Retractable Technologies go up and down completely randomly.

Pair Corralation between Cardinal Health and Retractable Technologies

Considering the 90-day investment horizon Cardinal Health is expected to generate 5.41 times less return on investment than Retractable Technologies. But when comparing it to its historical volatility, Cardinal Health is 3.55 times less risky than Retractable Technologies. It trades about 0.09 of its potential returns per unit of risk. Retractable Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Retractable Technologies on November 28, 2024 and sell it today you would earn a total of  18.00  from holding Retractable Technologies or generate 29.03% 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.  Retractable Technologies

Cardinal Health

Risk-Adjusted Performance

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 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.

Retractable Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Retractable Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Retractable Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and Retractable Technologies

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

The idea behind Cardinal Health and Retractable Technologies 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.