Correlation Between SHIN ETSU and Cardinal Health

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

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

Diversification Opportunities for SHIN ETSU and Cardinal Health

-0.63

Correlation Coefficient

SHIN ETSU  Cardinal Health

Excellent diversification

The 3 months correlation between SHIN and Cardinal is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and SHIN ETSU 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 SHIN ETSU CHEMICAL 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 SHIN ETSU i.e., SHIN ETSU and Cardinal Health go up and down completely randomly.

Pair Corralation between SHIN ETSU and Cardinal Health

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to under-perform the Cardinal Health. In addition to that, SHIN ETSU is 1.03 times more volatile than Cardinal Health. It trades about -0.07 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.11 per unit of volatility. If you would invest  9,930  in Cardinal Health on September 18, 2024 and sell it today you would earn a total of  1,265  from holding Cardinal Health or generate 12.74% return on investment over 90 days.

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

SHIN ETSU CHEMICAL  vs.  Cardinal Health

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHIN ETSU and Cardinal Health

The main advantage of trading using opposite SHIN ETSU and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN ETSU 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 SHIN ETSU CHEMICAL 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.