Correlation Between Cardinal Health and SOFI TECHNOLOGIES

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

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

Diversification Opportunities for Cardinal Health and SOFI TECHNOLOGIES

0.29

Correlation Coefficient

Cardinal Health  SOFI TECHNOLOGIES

Modest diversification

The 3 months correlation between Cardinal and SOFI is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of Cardinal Health i.e., Cardinal Health and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Cardinal Health and SOFI TECHNOLOGIES

Assuming the 90 days horizon Cardinal Health is expected to generate 0.33 times more return on investment than SOFI TECHNOLOGIES. However, Cardinal Health is 3.04 times less risky than SOFI TECHNOLOGIES. It trades about 0.11 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about -0.07 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cardinal Health  vs.  SOFI TECHNOLOGIES

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.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOFI TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cardinal Health and SOFI TECHNOLOGIES

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

The idea behind Cardinal Health and SOFI TECHNOLOGIES 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.