Correlation Between DEVRY EDUCATION and Cardinal Health

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

By analyzing existing cross correlation between DEVRY EDUCATION GRP and Cardinal Health, you can compare the effects of market volatilities on DEVRY EDUCATION and Cardinal 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 DEVRY EDUCATION with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of DEVRY EDUCATION and Cardinal Health.

Diversification Opportunities for DEVRY EDUCATION and Cardinal Health

0.89

Correlation Coefficient

DEVRY EDUCATION  Cardinal Health

Very poor diversification

The 3 months correlation between DEVRY and Cardinal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding DEVRY EDUCATION GRP and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and DEVRY EDUCATION 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 DEVRY EDUCATION GRP are associated (or correlated) with Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of DEVRY EDUCATION i.e., DEVRY EDUCATION and Cardinal Health go up and down completely randomly.

Pair Corralation between DEVRY EDUCATION and Cardinal Health

Assuming the 90 days trading horizon DEVRY EDUCATION GRP is expected to generate 1.72 times more return on investment than Cardinal Health. However, DEVRY EDUCATION is 1.72 times more volatile than Cardinal Health. It trades about 0.1 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.06 per unit of risk. If you would invest  5,150  in DEVRY EDUCATION GRP on October 6, 2024 and sell it today you would earn a total of  3,950  from holding DEVRY EDUCATION GRP or generate 76.7% return on investment over 90 days.

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

DEVRY EDUCATION GRP  vs.  Cardinal Health

DEVRY EDUCATION GRP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DEVRY EDUCATION GRP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DEVRY EDUCATION unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Health

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DEVRY EDUCATION and Cardinal Health

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

The idea behind DEVRY EDUCATION GRP and Cardinal Health 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..