Correlation Between Cardinal Health and CVS Health
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and CVS 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 Cardinal Health and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and CVS Health Corp, you can compare the effects of market volatilities on Cardinal Health and CVS 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 Cardinal Health with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and CVS Health.
Diversification Opportunities for Cardinal Health and CVS Health
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cardinal and CVS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Cardinal Health 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 are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Cardinal Health i.e., Cardinal Health and CVS Health go up and down completely randomly.
Pair Corralation between Cardinal Health and CVS Health
Assuming the 90 days trading horizon Cardinal Health is expected to generate 0.57 times more return on investment than CVS Health. However, Cardinal Health is 1.77 times less risky than CVS Health. It trades about 0.21 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.07 per unit of risk. If you would invest 11,082 in Cardinal Health on August 28, 2024 and sell it today you would earn a total of 1,066 from holding Cardinal Health or generate 9.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. CVS Health Corp
Performance |
| Timeline |
| Cardinal Health |
| CVS Health Corp |
Cardinal Health and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and CVS Health
The main advantage of trading using opposite Cardinal Health and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, CVS 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 CVS Health will offset losses from the drop in CVS Health's long position.| Cardinal Health vs. Arrow Electronics | Cardinal Health vs. Zoom Video Communications | Cardinal Health vs. BE Semiconductor Industries | Cardinal Health vs. Compagnie Plastic Omnium |
| CVS Health vs. Samsung Electronics Co | CVS Health vs. Samsung Electronics Co | CVS Health vs. Hyundai Motor | CVS Health vs. Toyota Motor Corp |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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