Correlation Between Universal Technical and Cardinal Health

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

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

Diversification Opportunities for Universal Technical and Cardinal Health

0.74

Correlation Coefficient

Universal Technical  Cardinal Health

Poor diversification

The 3 months correlation between Universal and Cardinal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Universal Technical Institute and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Universal Technical 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 Universal Technical Institute 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 Universal Technical i.e., Universal Technical and Cardinal Health go up and down completely randomly.

Pair Corralation between Universal Technical and Cardinal Health

Considering the 90-day investment horizon Universal Technical Institute is expected to generate 2.2 times more return on investment than Cardinal Health. However, Universal Technical is 2.2 times more volatile than Cardinal Health. It trades about 0.02 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.02 per unit of risk. If you would invest  2,565  in Universal Technical Institute on October 10, 2024 and sell it today you would earn a total of  8.00  from holding Universal Technical Institute or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Universal Technical Institute  vs.  Cardinal Health

Universal Technical

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Universal Technical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Universal Technical and Cardinal Health

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