Correlation Between Cardinal Health and AMERICAN

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

By analyzing existing cross correlation between Cardinal Health and AMERICAN EXPRESS 42, you can compare the effects of market volatilities on Cardinal Health and AMERICAN 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 AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and AMERICAN.

Diversification Opportunities for Cardinal Health and AMERICAN

-0.14

Correlation Coefficient

Cardinal Health  AMERICAN

Good diversification

The 3 months correlation between Cardinal and AMERICAN is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and AMERICAN EXPRESS 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN EXPRESS 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN EXPRESS has no effect on the direction of Cardinal Health i.e., Cardinal Health and AMERICAN go up and down completely randomly.

Pair Corralation between Cardinal Health and AMERICAN

Considering the 90-day investment horizon Cardinal Health is expected to generate 3.22 times more return on investment than AMERICAN. However, Cardinal Health is 3.22 times more volatile than AMERICAN EXPRESS 42. It trades about 0.09 of its potential returns per unit of risk. AMERICAN EXPRESS 42 is currently generating about -0.05 per unit of risk. If you would invest  12,274  in Cardinal Health on December 3, 2024 and sell it today you would earn a total of  674.00  from holding Cardinal Health or generate 5.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Cardinal Health  vs.  AMERICAN EXPRESS 42

Cardinal Health

Risk-Adjusted Performance

OK

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.

AMERICAN EXPRESS

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMERICAN EXPRESS 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health and AMERICAN

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

The idea behind Cardinal Health and AMERICAN EXPRESS 42 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.