Correlation Between CARDINAL HEALTH and Garofalo Health

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

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

Diversification Opportunities for CARDINAL HEALTH and Garofalo Health

0.22

Correlation Coefficient

CARDINAL HEALTH  Garofalo Health

Modest diversification

The 3 months correlation between CARDINAL and Garofalo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH and Garofalo Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garofalo Health Care 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 Garofalo Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garofalo Health Care has no effect on the direction of CARDINAL HEALTH i.e., CARDINAL HEALTH and Garofalo Health go up and down completely randomly.

Pair Corralation between CARDINAL HEALTH and Garofalo Health

Assuming the 90 days trading horizon CARDINAL HEALTH is expected to generate 0.74 times more return on investment than Garofalo Health. However, CARDINAL HEALTH is 1.35 times less risky than Garofalo Health. It trades about -0.07 of its potential returns per unit of risk. Garofalo Health Care is currently generating about -0.18 per unit of risk. If you would invest  11,608  in CARDINAL HEALTH on October 8, 2024 and sell it today you would lose (148.00) from holding CARDINAL HEALTH or give up 1.27% of portfolio value over 90 days.

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

CARDINAL HEALTH  vs.  Garofalo Health Care

CARDINAL HEALTH

Risk-Adjusted Performance

10 of 100

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. In spite of comparatively fragile technical indicators, CARDINAL HEALTH unveiled solid returns over the last few months and may actually be approaching a breakup point.

Garofalo Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garofalo Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Garofalo Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CARDINAL HEALTH and Garofalo Health

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

The idea behind CARDINAL HEALTH and Garofalo Health Care 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.