Correlation Between Cardinal Health and Southland Holdings

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

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

Diversification Opportunities for Cardinal Health and Southland Holdings

-0.45

Correlation Coefficient

Cardinal Health  Southland Holdings

Very good diversification

The 3 months correlation between Cardinal and Southland is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland Holdings 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 Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Cardinal Health i.e., Cardinal Health and Southland Holdings go up and down completely randomly.

Pair Corralation between Cardinal Health and Southland Holdings

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.3 times more return on investment than Southland Holdings. However, Cardinal Health is 3.33 times less risky than Southland Holdings. It trades about 0.08 of its potential returns per unit of risk. Southland Holdings is currently generating about -0.02 per unit of risk. If you would invest  7,625  in Cardinal Health on October 5, 2024 and sell it today you would earn a total of  4,177  from holding Cardinal Health or generate 54.78% return on investment over 90 days.

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

Cardinal Health  vs.  Southland Holdings

Cardinal Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 5 (%) 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 February 2025.

Southland Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southland Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Southland Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cardinal Health and Southland Holdings

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

The idea behind Cardinal Health and Southland Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.