Correlation Between Cardinal Health and Loews Corp

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

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

Diversification Opportunities for Cardinal Health and Loews Corp

0.91

Correlation Coefficient

Cardinal Health  Loews Corp

Almost no diversification

The 3 months correlation between Cardinal and Loews is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of Cardinal Health i.e., Cardinal Health and Loews Corp go up and down completely randomly.

Pair Corralation between Cardinal Health and Loews Corp

Assuming the 90 days horizon Cardinal Health is expected to generate 0.91 times more return on investment than Loews Corp. However, Cardinal Health is 1.1 times less risky than Loews Corp. It trades about 0.06 of its potential returns per unit of risk. Loews Corp is currently generating about -0.06 per unit of risk. If you would invest  11,544  in Cardinal Health on October 10, 2024 and sell it today you would earn a total of  161.00  from holding Cardinal Health or generate 1.39% return on investment over 90 days.

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

Cardinal Health  vs.  Loews Corp

Cardinal Health

Risk-Adjusted Performance

8 of 100

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 uncertain basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Loews Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cardinal Health and Loews Corp

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

The idea behind Cardinal Health and Loews Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.