Correlation Between European Metals and Cardinal Health

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

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

Diversification Opportunities for European Metals and Cardinal Health

-0.4

Correlation Coefficient

European Metals  Cardinal Health

Very good diversification

The 3 months correlation between European and Cardinal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Cardinal Health go up and down completely randomly.

Pair Corralation between European Metals and Cardinal Health

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Cardinal Health. In addition to that, European Metals is 1.87 times more volatile than Cardinal Health. It trades about -0.07 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.17 per unit of volatility. If you would invest  11,035  in Cardinal Health on October 26, 2024 and sell it today you would earn a total of  1,898  from holding Cardinal Health or generate 17.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

European Metals Holdings  vs.  Cardinal Health

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cardinal Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cardinal Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Cardinal Health

The main advantage of trading using opposite European Metals and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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 European Metals Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..