Correlation Between Cardinal Health and Food Life

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

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

Diversification Opportunities for Cardinal Health and Food Life

0.54

Correlation Coefficient

Cardinal Health  Food Life

Very weak diversification

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

Pair Corralation between Cardinal Health and Food Life

Assuming the 90 days horizon Cardinal Health is expected to generate 0.82 times more return on investment than Food Life. However, Cardinal Health is 1.22 times less risky than Food Life. It trades about 0.35 of its potential returns per unit of risk. Food Life Companies is currently generating about -0.38 per unit of risk. If you would invest  11,275  in Cardinal Health on October 22, 2024 and sell it today you would earn a total of  1,040  from holding Cardinal Health or generate 9.22% 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.  Food Life Companies

Cardinal Health

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Food Life Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Food Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cardinal Health and Food Life

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

The idea behind Cardinal Health and Food Life Companies 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.