Correlation Between Cardinal Health and SHIP HEALTHCARE

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

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

Diversification Opportunities for Cardinal Health and SHIP HEALTHCARE

-0.23

Correlation Coefficient

Cardinal Health  SHIP HEALTHCARE

Very good diversification

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

Pair Corralation between Cardinal Health and SHIP HEALTHCARE

Assuming the 90 days horizon Cardinal Health is expected to generate 0.98 times more return on investment than SHIP HEALTHCARE. However, Cardinal Health is 1.02 times less risky than SHIP HEALTHCARE. It trades about 0.11 of its potential returns per unit of risk. SHIP HEALTHCARE HLDGINC is currently generating about -0.05 per unit of risk. If you would invest  11,315  in Cardinal Health on December 29, 2024 and sell it today you would earn a total of  1,075  from holding Cardinal Health or generate 9.5% return on investment over 90 days.

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

Cardinal Health  vs.  SHIP HEALTHCARE HLDGINC

Cardinal Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SHIP HEALTHCARE HLDGINC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHIP HEALTHCARE HLDGINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SHIP HEALTHCARE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cardinal Health and SHIP HEALTHCARE

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

The idea behind Cardinal Health and SHIP HEALTHCARE HLDGINC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.