Correlation Between Cardinal Health and Universal Health
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Universal 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 Universal 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 Universal Health Services, you can compare the effects of market volatilities on Cardinal Health and Universal 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 Universal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Universal Health.
Diversification Opportunities for Cardinal Health and Universal Health
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cardinal and Universal is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Universal Health Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Services 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Services has no effect on the direction of Cardinal Health i.e., Cardinal Health and Universal Health go up and down completely randomly.
Pair Corralation between Cardinal Health and Universal Health
Assuming the 90 days trading horizon Cardinal Health is expected to generate 1.73 times more return on investment than Universal Health. However, Cardinal Health is 1.73 times more volatile than Universal Health Services. It trades about 0.29 of its potential returns per unit of risk. Universal Health Services is currently generating about -0.08 per unit of risk. If you would invest 10,836 in Cardinal Health on August 31, 2024 and sell it today you would earn a total of 1,450 from holding Cardinal Health or generate 13.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. Universal Health Services
Performance |
| Timeline |
| Cardinal Health |
| Universal Health Services |
Cardinal Health and Universal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Universal Health
The main advantage of trading using opposite Cardinal Health and Universal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Universal 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 Universal Health will offset losses from the drop in Universal Health's long position.| Cardinal Health vs. Neometals | Cardinal Health vs. Coor Service Management | Cardinal Health vs. Aeorema Communications Plc | Cardinal Health vs. JLEN Environmental Assets |
| Universal Health vs. Zegona Communications Plc | Universal Health vs. Silvercorp Metals | Universal Health vs. Darden Restaurants | Universal Health vs. Cairn Homes PLC |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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