Correlation Between HP and CARDINAL

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

By analyzing existing cross correlation between HP Inc and CARDINAL HEALTH INC, you can compare the effects of market volatilities on HP and CARDINAL 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 HP with a short position of CARDINAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and CARDINAL.

Diversification Opportunities for HP and CARDINAL

-0.21

Correlation Coefficient

HP  CARDINAL

Very good diversification

The 3 months correlation between HP and CARDINAL is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and CARDINAL HEALTH INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARDINAL HEALTH INC and HP 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 HP Inc are associated (or correlated) with CARDINAL. 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 INC has no effect on the direction of HP i.e., HP and CARDINAL go up and down completely randomly.

Pair Corralation between HP and CARDINAL

Considering the 90-day investment horizon HP Inc is expected to under-perform the CARDINAL. In addition to that, HP is 1.45 times more volatile than CARDINAL HEALTH INC. It trades about -0.14 of its total potential returns per unit of risk. CARDINAL HEALTH INC is currently generating about 0.02 per unit of volatility. If you would invest  8,238  in CARDINAL HEALTH INC on December 30, 2024 and sell it today you would earn a total of  51.00  from holding CARDINAL HEALTH INC or generate 0.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.06%
Values	Daily Returns

HP Inc  vs.  CARDINAL HEALTH INC

HP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

CARDINAL HEALTH INC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARDINAL HEALTH INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CARDINAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HP and CARDINAL

The main advantage of trading using opposite HP and CARDINAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, CARDINAL 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 will offset losses from the drop in CARDINAL's long position.

The idea behind HP Inc and CARDINAL HEALTH INC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.