Correlation Between CARDINAL HEALTH and Eli Lilly

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

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

Diversification Opportunities for CARDINAL HEALTH and Eli Lilly

0.31

Correlation Coefficient

CARDINAL HEALTH  Eli Lilly

Weak diversification

The 3 months correlation between CARDINAL and Eli is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly 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 Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of CARDINAL HEALTH i.e., CARDINAL HEALTH and Eli Lilly go up and down completely randomly.

Pair Corralation between CARDINAL HEALTH and Eli Lilly

Assuming the 90 days trading horizon CARDINAL HEALTH is expected to generate 0.45 times more return on investment than Eli Lilly. However, CARDINAL HEALTH is 2.25 times less risky than Eli Lilly. It trades about 0.15 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.03 per unit of risk. If you would invest  11,280  in CARDINAL HEALTH on December 21, 2024 and sell it today you would earn a total of  955.00  from holding CARDINAL HEALTH or generate 8.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

CARDINAL HEALTH  vs.  Eli Lilly and

CARDINAL HEALTH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CARDINAL HEALTH are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, CARDINAL HEALTH may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Eli Lilly

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eli Lilly is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CARDINAL HEALTH and Eli Lilly

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

The idea behind CARDINAL HEALTH and Eli Lilly and 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.