Correlation Between Cardinal Health and Titan Pharmaceuticals

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

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

Diversification Opportunities for Cardinal Health and Titan Pharmaceuticals

0.54

Correlation Coefficient

Cardinal Health  Titan Pharmaceuticals

Very weak diversification

The 3 months correlation between Cardinal and Titan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Titan Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Pharmaceuticals 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 Titan Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Pharmaceuticals has no effect on the direction of Cardinal Health i.e., Cardinal Health and Titan Pharmaceuticals go up and down completely randomly.

Pair Corralation between Cardinal Health and Titan Pharmaceuticals

Considering the 90-day investment horizon Cardinal Health is expected to generate 1.53 times less return on investment than Titan Pharmaceuticals. But when comparing it to its historical volatility, Cardinal Health is 5.52 times less risky than Titan Pharmaceuticals. It trades about 0.23 of its potential returns per unit of risk. Titan Pharmaceuticals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  340.00  in Titan Pharmaceuticals on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Titan Pharmaceuticals or generate 13.82% return on investment over 90 days.

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

Cardinal Health  vs.  Titan Pharmaceuticals

Cardinal Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Cardinal Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Titan Pharmaceuticals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Pharmaceuticals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Titan Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and Titan Pharmaceuticals

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

The idea behind Cardinal Health and Titan Pharmaceuticals 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .