Correlation Between Waste Management and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Cardinal Health, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Cardinal Health.
Diversification Opportunities for Waste Management and Cardinal Health
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waste and Cardinal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Cardinal Health go up and down completely randomly.
Pair Corralation between Waste Management and Cardinal Health
Assuming the 90 days trading horizon Waste Management is expected to under-perform the Cardinal Health. But the stock apears to be less risky and, when comparing its historical volatility, Waste Management is 1.55 times less risky than Cardinal Health. The stock trades about -0.59 of its potential returns per unit of risk. The Cardinal Health is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 12,084 in Cardinal Health on October 9, 2024 and sell it today you would lose (79.00) from holding Cardinal Health or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. Cardinal Health
Performance |
| Timeline |
| Waste Management |
| Cardinal Health |
Waste Management and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Cardinal Health
The main advantage of trading using opposite Waste Management and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Check Point Software | Waste Management vs. Impax Asset Management | Waste Management vs. Atalaya Mining | Waste Management vs. Technicolor |
| Cardinal Health vs. Walmart | Cardinal Health vs. BYD Co | Cardinal Health vs. Volkswagen AG | Cardinal Health vs. Volkswagen AG Non Vtg |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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