Correlation Between Cardinal Health and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Costco Wholesale 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 Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Costco Wholesale Corp, you can compare the effects of market volatilities on Cardinal Health and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Costco Wholesale.
Diversification Opportunities for Cardinal Health and Costco Wholesale
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cardinal and Costco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of Cardinal Health i.e., Cardinal Health and Costco Wholesale go up and down completely randomly.
Pair Corralation between Cardinal Health and Costco Wholesale
Assuming the 90 days trading horizon Cardinal Health is expected to generate 0.85 times more return on investment than Costco Wholesale. However, Cardinal Health is 1.17 times less risky than Costco Wholesale. It trades about 0.24 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about -0.42 per unit of risk. If you would invest 11,716 in Cardinal Health on October 15, 2024 and sell it today you would earn a total of 428.00 from holding Cardinal Health or generate 3.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. Costco Wholesale Corp
Performance |
| Timeline |
| Cardinal Health |
| Costco Wholesale Corp |
Cardinal Health and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Costco Wholesale
The main advantage of trading using opposite Cardinal Health and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Cardinal Health vs. Walmart | Cardinal Health vs. BYD Co | Cardinal Health vs. Volkswagen AG | Cardinal Health vs. Volkswagen AG Non Vtg |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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