Correlation Between Cardinal Health and Yancoal Australia

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

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

Diversification Opportunities for Cardinal Health and Yancoal Australia

-0.11

Correlation Coefficient

Cardinal Health  Yancoal Australia

Good diversification

The 3 months correlation between Cardinal and Yancoal is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia 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 Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of Cardinal Health i.e., Cardinal Health and Yancoal Australia go up and down completely randomly.

Pair Corralation between Cardinal Health and Yancoal Australia

Assuming the 90 days horizon Cardinal Health is expected to generate 2.65 times less return on investment than Yancoal Australia. But when comparing it to its historical volatility, Cardinal Health is 2.26 times less risky than Yancoal Australia. It trades about 0.05 of its potential returns per unit of risk. Yancoal Australia is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  265.00  in Yancoal Australia on October 5, 2024 and sell it today you would earn a total of  110.00  from holding Yancoal Australia or generate 41.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Cardinal Health  vs.  Yancoal Australia

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.

Yancoal Australia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yancoal Australia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Yancoal Australia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cardinal Health and Yancoal Australia

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

The idea behind Cardinal Health and Yancoal Australia 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.