Correlation Between Edgewell Personal and Cardinal Health

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

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

Diversification Opportunities for Edgewell Personal and Cardinal Health

0.37

Correlation Coefficient

Edgewell Personal  Cardinal Health

Weak diversification

The 3 months correlation between Edgewell and Cardinal is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Edgewell Personal Care and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Edgewell Personal 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 Edgewell Personal Care 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 Edgewell Personal i.e., Edgewell Personal and Cardinal Health go up and down completely randomly.

Pair Corralation between Edgewell Personal and Cardinal Health

Considering the 90-day investment horizon Edgewell Personal Care is expected to under-perform the Cardinal Health. But the stock apears to be less risky and, when comparing its historical volatility, Edgewell Personal Care is 1.06 times less risky than Cardinal Health. The stock trades about -0.05 of its potential returns per unit of risk. The Cardinal Health is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,405  in Cardinal Health on October 9, 2024 and sell it today you would earn a total of  558.00  from holding Cardinal Health or generate 4.89% return on investment over 90 days.

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

Edgewell Personal Care  vs.  Cardinal Health

Edgewell Personal Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Edgewell Personal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Cardinal Health

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cardinal Health is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Edgewell Personal and Cardinal Health

The main advantage of trading using opposite Edgewell Personal and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgewell Personal 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 Edgewell Personal Care 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.