Correlation Between Cardinal Health and Aurubis AG

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

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

Diversification Opportunities for Cardinal Health and Aurubis AG

0.79

Correlation Coefficient

Cardinal Health  Aurubis AG

Poor diversification

The 3 months correlation between Cardinal and Aurubis is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Aurubis AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurubis AG 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 Aurubis AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurubis AG has no effect on the direction of Cardinal Health i.e., Cardinal Health and Aurubis AG go up and down completely randomly.

Pair Corralation between Cardinal Health and Aurubis AG

Assuming the 90 days horizon Cardinal Health is expected to generate 0.71 times more return on investment than Aurubis AG. However, Cardinal Health is 1.41 times less risky than Aurubis AG. It trades about 0.07 of its potential returns per unit of risk. Aurubis AG is currently generating about 0.02 per unit of risk. If you would invest  8,374  in Cardinal Health on October 5, 2024 and sell it today you would earn a total of  3,026  from holding Cardinal Health or generate 36.14% return on investment over 90 days.

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

Cardinal Health  vs.  Aurubis AG

Cardinal Health

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Cardinal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Aurubis AG

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Aurubis AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Aurubis AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and Aurubis AG

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

The idea behind Cardinal Health and Aurubis AG 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.