Correlation Between Future Metals and Cardinal Health

Can any of the company-specific risk be diversified away by investing in both Future 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 Future 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 Future Metals NL and Cardinal Health, you can compare the effects of market volatilities on Future 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 Future Metals with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Metals and Cardinal Health.

Diversification Opportunities for Future Metals and Cardinal Health

-0.24

Correlation Coefficient

Future Metals  Cardinal Health

Very good diversification

The 3 months correlation between Future and Cardinal is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Future 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 Future Metals NL 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 Future Metals i.e., Future Metals and Cardinal Health go up and down completely randomly.

Pair Corralation between Future Metals and Cardinal Health

Assuming the 90 days trading horizon Future Metals NL is expected to under-perform the Cardinal Health. In addition to that, Future Metals is 2.71 times more volatile than Cardinal Health. It trades about -0.44 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.04 per unit of volatility. If you would invest  12,054  in Cardinal Health on October 11, 2024 and sell it today you would earn a total of  96.00  from holding Cardinal Health or generate 0.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Future Metals NL  vs.  Cardinal Health

Future Metals NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Metals NL 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Future Metals and Cardinal Health

The main advantage of trading using opposite Future Metals and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Future 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 Future Metals NL 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.