Correlation Between PFIZER and Cardinal Health

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

By analyzing existing cross correlation between PFIZER INC 43 and Cardinal Health, you can compare the effects of market volatilities on PFIZER 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 PFIZER with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of PFIZER and Cardinal Health.

Diversification Opportunities for PFIZER and Cardinal Health

-0.54

Correlation Coefficient

PFIZER  Cardinal Health

Excellent diversification

The 3 months correlation between PFIZER and Cardinal is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding PFIZER INC 43 and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and PFIZER 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 PFIZER INC 43 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 PFIZER i.e., PFIZER and Cardinal Health go up and down completely randomly.

Pair Corralation between PFIZER and Cardinal Health

Assuming the 90 days trading horizon PFIZER INC 43 is expected to generate 1.23 times more return on investment than Cardinal Health. However, PFIZER is 1.23 times more volatile than Cardinal Health. It trades about 0.1 of its potential returns per unit of risk. Cardinal Health is currently generating about -0.14 per unit of risk. If you would invest  8,796  in PFIZER INC 43 on September 27, 2024 and sell it today you would earn a total of  195.00  from holding PFIZER INC 43 or generate 2.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

PFIZER INC 43  vs.  Cardinal Health

PFIZER INC 43

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC 43 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PFIZER 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 7 (%) 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 January 2025.

Pair Trading with PFIZER and Cardinal Health

The main advantage of trading using opposite PFIZER and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PFIZER 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 PFIZER INC 43 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 Valuation module to check real value of public entities based on technical and fundamental data.