Correlation Between Cardinal Health and Balchem
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Balchem 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 Balchem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Balchem, you can compare the effects of market volatilities on Cardinal Health and Balchem 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 Balchem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Balchem.
Diversification Opportunities for Cardinal Health and Balchem
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cardinal and Balchem is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Balchem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balchem 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 Balchem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balchem has no effect on the direction of Cardinal Health i.e., Cardinal Health and Balchem go up and down completely randomly.
Pair Corralation between Cardinal Health and Balchem
Considering the 90-day investment horizon Cardinal Health is expected to generate 0.93 times more return on investment than Balchem. However, Cardinal Health is 1.08 times less risky than Balchem. It trades about 0.08 of its potential returns per unit of risk. Balchem is currently generating about 0.06 per unit of risk. If you would invest 8,458 in Cardinal Health on September 4, 2024 and sell it today you would earn a total of 3,789 from holding Cardinal Health or generate 44.8% 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. Balchem
Performance |
| Timeline |
| Cardinal Health |
| Balchem |
Cardinal Health and Balchem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Balchem
The main advantage of trading using opposite Cardinal Health and Balchem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Balchem 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 Balchem will offset losses from the drop in Balchem's long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| Balchem vs. Sensient Technologies | Balchem vs. Innospec | Balchem vs. Minerals Technologies | Balchem vs. Oil Dri |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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