Correlation Between CARDINAL HEALTH and Rock Tech

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

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

Diversification Opportunities for CARDINAL HEALTH and Rock Tech

-0.6

Correlation Coefficient

CARDINAL HEALTH  Rock Tech

Excellent diversification

The 3 months correlation between CARDINAL and Rock is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of CARDINAL HEALTH i.e., CARDINAL HEALTH and Rock Tech go up and down completely randomly.

Pair Corralation between CARDINAL HEALTH and Rock Tech

Assuming the 90 days trading horizon CARDINAL HEALTH is expected to generate 0.25 times more return on investment than Rock Tech. However, CARDINAL HEALTH is 4.01 times less risky than Rock Tech. It trades about 0.09 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.01 per unit of risk. If you would invest  7,036  in CARDINAL HEALTH on October 10, 2024 and sell it today you would earn a total of  4,499  from holding CARDINAL HEALTH or generate 63.94% return on investment over 90 days.

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

CARDINAL HEALTH  vs.  Rock Tech Lithium

CARDINAL HEALTH

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CARDINAL HEALTH are ranked lower than 9 (%) 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 February 2025.

Rock Tech Lithium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rock Tech Lithium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Rock Tech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CARDINAL HEALTH and Rock Tech

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

The idea behind CARDINAL HEALTH and Rock Tech Lithium 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.