Correlation Between NORFOLK and Cardinal Health

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

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

Diversification Opportunities for NORFOLK and Cardinal Health

0.06

Correlation Coefficient

NORFOLK  Cardinal Health

Significant diversification

The 3 months correlation between NORFOLK and Cardinal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NORFOLK SOUTHN P and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and NORFOLK 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 NORFOLK SOUTHN P 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 NORFOLK i.e., NORFOLK and Cardinal Health go up and down completely randomly.

Pair Corralation between NORFOLK and Cardinal Health

Assuming the 90 days trading horizon NORFOLK SOUTHN P is expected to under-perform the Cardinal Health. But the bond apears to be less risky and, when comparing its historical volatility, NORFOLK SOUTHN P is 3.73 times less risky than Cardinal Health. The bond trades about 0.0 of its potential returns per unit of risk. The Cardinal Health is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,392  in Cardinal Health on October 26, 2024 and sell it today you would earn a total of  5,491  from holding Cardinal Health or generate 74.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.38%
Values	Daily Returns

NORFOLK SOUTHN P  vs.  Cardinal Health

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 NORFOLK and Cardinal Health

The main advantage of trading using opposite NORFOLK and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORFOLK 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 NORFOLK SOUTHN P 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.