Correlation Between FS KKR and Cardinal Health

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

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

Diversification Opportunities for FS KKR and Cardinal Health

0.74

Correlation Coefficient

FS KKR  Cardinal Health

Poor diversification

The 3 months correlation between FSK and Cardinal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding FS KKR Capital and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and FS KKR 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 FS KKR Capital 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 FS KKR i.e., FS KKR and Cardinal Health go up and down completely randomly.

Pair Corralation between FS KKR and Cardinal Health

Considering the 90-day investment horizon FS KKR Capital is expected to generate 0.79 times more return on investment than Cardinal Health. However, FS KKR Capital is 1.26 times less risky than Cardinal Health. It trades about 0.1 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.07 per unit of risk. If you would invest  1,314  in FS KKR Capital on October 9, 2024 and sell it today you would earn a total of  860.00  from holding FS KKR Capital or generate 65.45% return on investment over 90 days.

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

FS KKR Capital  vs.  Cardinal Health

FS KKR Capital

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, FS KKR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 FS KKR and Cardinal Health

The main advantage of trading using opposite FS KKR and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FS KKR 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 FS KKR Capital 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.