Correlation Between Cardinal Health and Quaker Chemical

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

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

Diversification Opportunities for Cardinal Health and Quaker Chemical

0.1

Correlation Coefficient

Cardinal Health  Quaker Chemical

Average diversification

The 3 months correlation between Cardinal and Quaker is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of Cardinal Health i.e., Cardinal Health and Quaker Chemical go up and down completely randomly.

Pair Corralation between Cardinal Health and Quaker Chemical

Assuming the 90 days horizon Cardinal Health is expected to generate 0.69 times more return on investment than Quaker Chemical. However, Cardinal Health is 1.46 times less risky than Quaker Chemical. It trades about 0.13 of its potential returns per unit of risk. Quaker Chemical is currently generating about -0.08 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.  Quaker Chemical

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.

Quaker Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cardinal Health and Quaker Chemical

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

The idea behind Cardinal Health and Quaker Chemical 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.