Correlation Between Cardinal Health and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Dow Jones Industrial, you can compare the effects of market volatilities on Cardinal Health and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Dow Jones.
Diversification Opportunities for Cardinal Health and Dow Jones
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cardinal and Dow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Cardinal Health i.e., Cardinal Health and Dow Jones go up and down completely randomly.
Pair Corralation between Cardinal Health and Dow Jones
Considering the 90-day investment horizon Cardinal Health is expected to generate 2.38 times more return on investment than Dow Jones. However, Cardinal Health is 2.38 times more volatile than Dow Jones Industrial. It trades about 0.2 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 11,192 in Cardinal Health on August 24, 2024 and sell it today you would earn a total of 1,150 from holding Cardinal Health or generate 10.28% 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. Dow Jones Industrial
Performance |
| Timeline |
Cardinal Health and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Cardinal Health
Pair trading matchups for Cardinal Health
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Cardinal Health and Dow Jones
The main advantage of trading using opposite Cardinal Health and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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