Correlation Between Nike and Cardinal Health

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

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

Diversification Opportunities for Nike and Cardinal Health

-0.34

Correlation Coefficient

Nike  Cardinal Health

Very good diversification

The 3 months correlation between Nike and Cardinal is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Nike 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 Nike 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 Nike i.e., Nike and Cardinal Health go up and down completely randomly.

Pair Corralation between Nike and Cardinal Health

Assuming the 90 days trading horizon Nike Inc is expected to under-perform the Cardinal Health. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.04 times less risky than Cardinal Health. The stock trades about -0.08 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  11,570  in Cardinal Health on September 30, 2024 and sell it today you would lose (185.00) from holding Cardinal Health or give up 1.6% of portfolio value over 90 days.

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

Nike Inc  vs.  Cardinal Health

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cardinal Health

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nike and Cardinal Health

The main advantage of trading using opposite Nike and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.