Correlation Between Cardinal Health and Koninklijke Philips

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

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

Diversification Opportunities for Cardinal Health and Koninklijke Philips

-0.7

Correlation Coefficient

Cardinal Health  Koninklijke Philips

Excellent diversification

The 3 months correlation between Cardinal and Koninklijke is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips 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 Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Cardinal Health i.e., Cardinal Health and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Cardinal Health and Koninklijke Philips

Assuming the 90 days horizon Cardinal Health is expected to generate 1.31 times more return on investment than Koninklijke Philips. However, Cardinal Health is 1.31 times more volatile than Koninklijke Philips NV. It trades about 0.08 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about -0.03 per unit of risk. If you would invest  11,240  in Cardinal Health on October 10, 2024 and sell it today you would earn a total of  465.00  from holding Cardinal Health or generate 4.14% 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.  Koninklijke Philips NV

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.

Koninklijke Philips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke Philips NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cardinal Health and Koninklijke Philips

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

The idea behind Cardinal Health and Koninklijke Philips NV 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.