Correlation Between LENSAR and Cardinal Health

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

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

Diversification Opportunities for LENSAR and Cardinal Health

0.6

Correlation Coefficient

LENSAR  Cardinal Health

Poor diversification

The 3 months correlation between LENSAR and Cardinal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and LENSAR 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 LENSAR Inc 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 LENSAR i.e., LENSAR and Cardinal Health go up and down completely randomly.

Pair Corralation between LENSAR and Cardinal Health

Given the investment horizon of 90 days LENSAR Inc is expected to generate 5.38 times more return on investment than Cardinal Health. However, LENSAR is 5.38 times more volatile than Cardinal Health. It trades about 0.16 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.23 per unit of risk. If you would invest  866.00  in LENSAR Inc on December 28, 2024 and sell it today you would earn a total of  547.00  from holding LENSAR Inc or generate 63.16% return on investment over 90 days.

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

LENSAR Inc  vs.  Cardinal Health

LENSAR Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Cardinal Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LENSAR and Cardinal Health

The main advantage of trading using opposite LENSAR and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR 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 LENSAR Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.