Correlation Between Cardinal Health and Martin Marietta

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

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

Diversification Opportunities for Cardinal Health and Martin Marietta

0.18

Correlation Coefficient

Cardinal Health  Martin Marietta

Average diversification

The 3 months correlation between Cardinal and Martin is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials 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 Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Cardinal Health i.e., Cardinal Health and Martin Marietta go up and down completely randomly.

Pair Corralation between Cardinal Health and Martin Marietta

Assuming the 90 days horizon Cardinal Health is expected to generate 0.93 times more return on investment than Martin Marietta. However, Cardinal Health is 1.07 times less risky than Martin Marietta. It trades about 0.13 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.12 per unit of risk. If you would invest  11,315  in Cardinal Health on December 30, 2024 and sell it today you would earn a total of  1,300  from holding Cardinal Health or generate 11.49% return on investment over 90 days.

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

Cardinal Health  vs.  Martin Marietta Materials

Cardinal Health

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 10 (%) 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.

Martin Marietta Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cardinal Health and Martin Marietta

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

The idea behind Cardinal Health and Martin Marietta Materials 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.