Correlation Between Cardinal Health and FREEPORT

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

By analyzing existing cross correlation between Cardinal Health and FREEPORT MCMORAN INC 525, you can compare the effects of market volatilities on Cardinal Health and FREEPORT 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 FREEPORT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and FREEPORT.

Diversification Opportunities for Cardinal Health and FREEPORT

0.08

Correlation Coefficient

Cardinal Health  FREEPORT

Significant diversification

The 3 months correlation between Cardinal and FREEPORT is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and FREEPORT MCMORAN INC 525 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FREEPORT MCMORAN INC 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 FREEPORT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FREEPORT MCMORAN INC has no effect on the direction of Cardinal Health i.e., Cardinal Health and FREEPORT go up and down completely randomly.

Pair Corralation between Cardinal Health and FREEPORT

Considering the 90-day investment horizon Cardinal Health is expected to generate 3.21 times more return on investment than FREEPORT. However, Cardinal Health is 3.21 times more volatile than FREEPORT MCMORAN INC 525. It trades about 0.18 of its potential returns per unit of risk. FREEPORT MCMORAN INC 525 is currently generating about 0.01 per unit of risk. If you would invest  11,869  in Cardinal Health on December 25, 2024 and sell it today you would earn a total of  1,452  from holding Cardinal Health or generate 12.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Cardinal Health  vs.  FREEPORT MCMORAN INC 525

Cardinal Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 14 (%) 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.

FREEPORT MCMORAN INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FREEPORT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health and FREEPORT

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

The idea behind Cardinal Health and FREEPORT MCMORAN INC 525 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.