Correlation Between Cardinal Health and Church Dwight
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Church Dwight 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 Church Dwight into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Church Dwight, you can compare the effects of market volatilities on Cardinal Health and Church Dwight 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 Church Dwight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Church Dwight.
Diversification Opportunities for Cardinal Health and Church Dwight
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cardinal and Church is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Church Dwight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Church Dwight 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 Church Dwight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Church Dwight has no effect on the direction of Cardinal Health i.e., Cardinal Health and Church Dwight go up and down completely randomly.
Pair Corralation between Cardinal Health and Church Dwight
Considering the 90-day investment horizon Cardinal Health is expected to generate 1.68 times more return on investment than Church Dwight. However, Cardinal Health is 1.68 times more volatile than Church Dwight. It trades about 0.2 of its potential returns per unit of risk. Church Dwight is currently generating about 0.32 per unit of risk. If you would invest 11,087 in Cardinal Health on August 27, 2024 and sell it today you would earn a total of 1,097 from holding Cardinal Health or generate 9.89% 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. Church Dwight
Performance |
| Timeline |
| Cardinal Health |
| Church Dwight |
Cardinal Health and Church Dwight Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Church Dwight
The main advantage of trading using opposite Cardinal Health and Church Dwight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Church Dwight 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 Church Dwight will offset losses from the drop in Church Dwight's long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| Church Dwight vs. Kimberly Clark | Church Dwight vs. Colgate Palmolive | Church Dwight vs. Unilever PLC ADR | Church Dwight vs. Procter Gamble |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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