Correlation Between Technology One and Cardinal Health

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

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

Diversification Opportunities for Technology One and Cardinal Health

0.64

Correlation Coefficient

Technology One  Cardinal Health

Poor diversification

The 3 months correlation between Technology and Cardinal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Technology One Limited and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Technology One 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 Technology One Limited 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 Technology One i.e., Technology One and Cardinal Health go up and down completely randomly.

Pair Corralation between Technology One and Cardinal Health

Assuming the 90 days horizon Technology One Limited is expected to under-perform the Cardinal Health. In addition to that, Technology One is 2.36 times more volatile than Cardinal Health. It trades about -0.21 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.46 per unit of volatility. If you would invest  11,869  in Cardinal Health on October 26, 2024 and sell it today you would earn a total of  1,016  from holding Cardinal Health or generate 8.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Technology One Limited  vs.  Cardinal Health

Technology One

Risk-Adjusted Performance

11 of 100

Good

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

Cardinal Health

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Cardinal Health demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Technology One and Cardinal Health

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

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .