Correlation Between Cardinal Health and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Asbury Automotive 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 Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Asbury Automotive Group, you can compare the effects of market volatilities on Cardinal Health and Asbury Automotive 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 Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Asbury Automotive.
Diversification Opportunities for Cardinal Health and Asbury Automotive
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cardinal and Asbury is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive 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 Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of Cardinal Health i.e., Cardinal Health and Asbury Automotive go up and down completely randomly.
Pair Corralation between Cardinal Health and Asbury Automotive
Considering the 90-day investment horizon Cardinal Health is expected to generate 1.06 times less return on investment than Asbury Automotive. But when comparing it to its historical volatility, Cardinal Health is 1.73 times less risky than Asbury Automotive. It trades about 0.08 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17,896 in Asbury Automotive Group on August 28, 2024 and sell it today you would earn a total of 8,786 from holding Asbury Automotive Group or generate 49.09% 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. Asbury Automotive Group
Performance |
| Timeline |
| Cardinal Health |
| Asbury Automotive |
Cardinal Health and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Asbury Automotive
The main advantage of trading using opposite Cardinal Health and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Asbury Automotive 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 Asbury Automotive will offset losses from the drop in Asbury Automotive's long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| Asbury Automotive vs. Kingsway Financial Services | Asbury Automotive vs. KAR Auction Services | Asbury Automotive vs. Cango Inc | Asbury Automotive vs. Vroom Inc |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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