Correlation Between CARDINAL HEALTH and Qingling Motors

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

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

Diversification Opportunities for CARDINAL HEALTH and Qingling Motors

0.34

Correlation Coefficient

CARDINAL HEALTH  Qingling Motors

Weak diversification

The 3 months correlation between CARDINAL and Qingling is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH and Qingling Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingling Motors 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 Qingling Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingling Motors has no effect on the direction of CARDINAL HEALTH i.e., CARDINAL HEALTH and Qingling Motors go up and down completely randomly.

Pair Corralation between CARDINAL HEALTH and Qingling Motors

Assuming the 90 days trading horizon CARDINAL HEALTH is expected to generate 0.84 times more return on investment than Qingling Motors. However, CARDINAL HEALTH is 1.19 times less risky than Qingling Motors. It trades about 0.19 of its potential returns per unit of risk. Qingling Motors Co is currently generating about 0.02 per unit of risk. If you would invest  10,304  in CARDINAL HEALTH on October 25, 2024 and sell it today you would earn a total of  1,961  from holding CARDINAL HEALTH or generate 19.03% 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.  Qingling Motors Co

CARDINAL HEALTH

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CARDINAL HEALTH are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, CARDINAL HEALTH unveiled solid returns over the last few months and may actually be approaching a breakup point.

Qingling Motors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qingling Motors Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Qingling Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CARDINAL HEALTH and Qingling Motors

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

The idea behind CARDINAL HEALTH and Qingling Motors Co 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.