Correlation Between Cardinal Health and Suburban Propane

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

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

Diversification Opportunities for Cardinal Health and Suburban Propane

0.39

Correlation Coefficient

Cardinal Health  Suburban Propane

Weak diversification

The 3 months correlation between Cardinal and Suburban is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Suburban Propane Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suburban Propane Partners 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 Suburban Propane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suburban Propane Partners has no effect on the direction of Cardinal Health i.e., Cardinal Health and Suburban Propane go up and down completely randomly.

Pair Corralation between Cardinal Health and Suburban Propane

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.85 times more return on investment than Suburban Propane. However, Cardinal Health is 1.17 times less risky than Suburban Propane. It trades about 0.15 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about 0.08 per unit of risk. If you would invest  11,168  in Cardinal Health on October 24, 2024 and sell it today you would earn a total of  1,615  from holding Cardinal Health or generate 14.46% return on investment over 90 days.

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

Cardinal Health  vs.  Suburban Propane Partners

Cardinal Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 11 (%) 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.

Suburban Propane Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Suburban Propane Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Suburban Propane may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cardinal Health and Suburban Propane

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

The idea behind Cardinal Health and Suburban Propane Partners 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.