Correlation Between Eidesvik Offshore and Cardinal Health

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

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

Diversification Opportunities for Eidesvik Offshore and Cardinal Health

-0.69

Correlation Coefficient

Eidesvik Offshore  Cardinal Health

Excellent diversification

The 3 months correlation between Eidesvik and Cardinal is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Eidesvik Offshore 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 Eidesvik Offshore ASA 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 Eidesvik Offshore i.e., Eidesvik Offshore and Cardinal Health go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Cardinal Health

Assuming the 90 days trading horizon Eidesvik Offshore is expected to generate 2.33 times less return on investment than Cardinal Health. In addition to that, Eidesvik Offshore is 1.8 times more volatile than Cardinal Health. It trades about 0.02 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.09 per unit of volatility. If you would invest  6,300  in Cardinal Health on October 5, 2024 and sell it today you would earn a total of  5,065  from holding Cardinal Health or generate 80.4% return on investment over 90 days.

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

Eidesvik Offshore ASA  vs.  Cardinal Health

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cardinal Health

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Cardinal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eidesvik Offshore and Cardinal Health

The main advantage of trading using opposite Eidesvik Offshore and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eidesvik Offshore 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 Eidesvik Offshore ASA 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..