Correlation Between Cardinal Health and Direct Line
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Direct Line 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 Direct Line into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Direct Line Insurance, you can compare the effects of market volatilities on Cardinal Health and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Direct Line.
Diversification Opportunities for Cardinal Health and Direct Line
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cardinal and Direct is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Cardinal Health i.e., Cardinal Health and Direct Line go up and down completely randomly.
Pair Corralation between Cardinal Health and Direct Line
Considering the 90-day investment horizon Cardinal Health is expected to under-perform the Direct Line. But the stock apears to be less risky and, when comparing its historical volatility, Cardinal Health is 4.73 times less risky than Direct Line. The stock trades about -0.21 of its potential returns per unit of risk. The Direct Line Insurance is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 763.00 in Direct Line Insurance on September 14, 2024 and sell it today you would earn a total of 490.00 from holding Direct Line Insurance or generate 64.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. Direct Line Insurance
Performance |
| Timeline |
| Cardinal Health |
| Direct Line Insurance |
Cardinal Health and Direct Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Direct Line
The main advantage of trading using opposite Cardinal Health and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| Direct Line vs. Cardinal Health | Direct Line vs. Arm Holdings plc | Direct Line vs. Black Hills | Direct Line vs. Amkor Technology |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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