Correlation Between Sekisui Chemical and Cardinal Health

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

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

Diversification Opportunities for Sekisui Chemical and Cardinal Health

0.76

Correlation Coefficient

Sekisui Chemical  Cardinal Health

Poor diversification

The 3 months correlation between Sekisui and Cardinal is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui Chemical Co and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Sekisui Chemical 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 Sekisui Chemical Co 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 Sekisui Chemical i.e., Sekisui Chemical and Cardinal Health go up and down completely randomly.

Pair Corralation between Sekisui Chemical and Cardinal Health

Assuming the 90 days horizon Sekisui Chemical is expected to generate 1.98 times less return on investment than Cardinal Health. But when comparing it to its historical volatility, Sekisui Chemical Co is 1.08 times less risky than Cardinal Health. It trades about 0.06 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Sekisui Chemical Co  vs.  Cardinal Health

Sekisui Chemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sekisui Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Sekisui Chemical and Cardinal Health

The main advantage of trading using opposite Sekisui Chemical and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sekisui Chemical 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 Sekisui Chemical Co 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.