Correlation Between CARDINAL HEALTH and Renesas Electronics

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

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

Diversification Opportunities for CARDINAL HEALTH and Renesas Electronics

0.44

Correlation Coefficient

CARDINAL HEALTH  Renesas Electronics

Very weak diversification

The 3 months correlation between CARDINAL and Renesas is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of CARDINAL HEALTH i.e., CARDINAL HEALTH and Renesas Electronics go up and down completely randomly.

Pair Corralation between CARDINAL HEALTH and Renesas Electronics

Assuming the 90 days trading horizon CARDINAL HEALTH is expected to generate 2.05 times less return on investment than Renesas Electronics. But when comparing it to its historical volatility, CARDINAL HEALTH is 3.56 times less risky than Renesas Electronics. It trades about 0.14 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,213  in Renesas Electronics on December 23, 2024 and sell it today you would earn a total of  180.00  from holding Renesas Electronics or generate 14.84% return on investment over 90 days.

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

CARDINAL HEALTH  vs.  Renesas Electronics

CARDINAL HEALTH

Risk-Adjusted Performance

Good

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 fragile technical indicators, CARDINAL HEALTH may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Renesas Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Renesas Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARDINAL HEALTH and Renesas Electronics

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

The idea behind CARDINAL HEALTH and Renesas Electronics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.