Correlation Between CARDINAL and Toray Industries

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

By analyzing existing cross correlation between CARDINAL HEALTH INC and Toray Industries, you can compare the effects of market volatilities on CARDINAL and Toray Industries 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 CARDINAL with a short position of Toray Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARDINAL and Toray Industries.

Diversification Opportunities for CARDINAL and Toray Industries

-0.44

Correlation Coefficient

CARDINAL  Toray Industries

Very good diversification

The 3 months correlation between CARDINAL and Toray is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH INC and Toray Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toray Industries and CARDINAL 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 CARDINAL HEALTH INC are associated (or correlated) with Toray Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toray Industries has no effect on the direction of CARDINAL i.e., CARDINAL and Toray Industries go up and down completely randomly.

Pair Corralation between CARDINAL and Toray Industries

Assuming the 90 days trading horizon CARDINAL HEALTH INC is expected to generate 2.46 times more return on investment than Toray Industries. However, CARDINAL is 2.46 times more volatile than Toray Industries. It trades about 0.06 of its potential returns per unit of risk. Toray Industries is currently generating about 0.12 per unit of risk. If you would invest  8,694  in CARDINAL HEALTH INC on December 22, 2024 and sell it today you would earn a total of  378.00  from holding CARDINAL HEALTH INC or generate 4.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.0%
Values	Daily Returns

CARDINAL HEALTH INC  vs.  Toray Industries

CARDINAL HEALTH INC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CARDINAL HEALTH INC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, CARDINAL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Toray Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toray Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Toray Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CARDINAL and Toray Industries

The main advantage of trading using opposite CARDINAL and Toray Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARDINAL position performs unexpectedly, Toray Industries 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 Toray Industries will offset losses from the drop in Toray Industries' long position.

The idea behind CARDINAL HEALTH INC and Toray Industries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.