Correlation Between Freeport and Cardinal Health

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

By analyzing existing cross correlation between Freeport McMoRan 4125 percent and Cardinal Health, you can compare the effects of market volatilities on Freeport 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 Freeport with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Cardinal Health.

Diversification Opportunities for Freeport and Cardinal Health

-0.29

Correlation Coefficient

Freeport  Cardinal Health

Very good diversification

The 3 months correlation between Freeport and Cardinal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 4125 percent and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Freeport 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 Freeport McMoRan 4125 percent 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 Freeport i.e., Freeport and Cardinal Health go up and down completely randomly.

Pair Corralation between Freeport and Cardinal Health

Assuming the 90 days trading horizon Freeport is expected to generate 37.8 times less return on investment than Cardinal Health. But when comparing it to its historical volatility, Freeport McMoRan 4125 percent is 1.66 times less risky than Cardinal Health. It trades about 0.0 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,458  in Cardinal Health on October 3, 2024 and sell it today you would earn a total of  3,369  from holding Cardinal Health or generate 39.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Freeport McMoRan 4125 percent  vs.  Cardinal Health

Freeport McMoRan 4125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 4125 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cardinal Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Freeport and Cardinal Health

The main advantage of trading using opposite Freeport and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport 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 Freeport McMoRan 4125 percent 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.