Correlation Between Cedar Realty and Cardinal Health

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

By analyzing existing cross correlation between Cedar Realty Trust and Cardinal Health, you can compare the effects of market volatilities on Cedar Realty and Cardinal Health 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 Cedar Realty with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cedar Realty and Cardinal Health.

Diversification Opportunities for Cedar Realty and Cardinal Health

0.23

Correlation Coefficient

Cedar Realty  Cardinal Health

Modest diversification

The 3 months correlation between Cedar and Cardinal is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cedar Realty Trust and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Cedar Realty 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 Cedar Realty Trust are associated (or correlated) with Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Cedar Realty i.e., Cedar Realty and Cardinal Health go up and down completely randomly.

Pair Corralation between Cedar Realty and Cardinal Health

Assuming the 90 days trading horizon Cedar Realty is expected to generate 3.14 times less return on investment than Cardinal Health. In addition to that, Cedar Realty is 3.51 times more volatile than Cardinal Health. It trades about 0.04 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.41 per unit of volatility. If you would invest  11,784  in Cardinal Health on October 23, 2024 and sell it today you would earn a total of  843.00  from holding Cardinal Health or generate 7.15% return on investment over 90 days.

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

Cedar Realty Trust  vs.  Cardinal Health

Cedar Realty Trust

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cedar Realty Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cedar Realty may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cardinal Health

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 10 (%) 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.

Pair Trading with Cedar Realty and Cardinal Health

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

The idea behind Cedar Realty Trust and Cardinal Health 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.