Correlation Between Cardinal Health and China Resources

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

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

Diversification Opportunities for Cardinal Health and China Resources

-0.62

Correlation Coefficient

Cardinal Health  China Resources

Excellent diversification

The 3 months correlation between Cardinal and China is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Cardinal Health i.e., Cardinal Health and China Resources go up and down completely randomly.

Pair Corralation between Cardinal Health and China Resources

Assuming the 90 days horizon Cardinal Health is expected to generate 0.47 times more return on investment than China Resources. However, Cardinal Health is 2.15 times less risky than China Resources. It trades about 0.07 of its potential returns per unit of risk. China Resources Beer is currently generating about 0.0 per unit of risk. If you would invest  11,519  in Cardinal Health on November 29, 2024 and sell it today you would earn a total of  641.00  from holding Cardinal Health or generate 5.56% return on investment over 90 days.

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

Cardinal Health  vs.  China Resources Beer

Cardinal Health

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in March 2025.

China Resources Beer

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cardinal Health and China Resources

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

The idea behind Cardinal Health and China Resources Beer 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.