Correlation Between Cardinal Health and Hooker Furniture

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Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Hooker Furniture 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 Hooker Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Hooker Furniture, you can compare the effects of market volatilities on Cardinal Health and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Hooker Furniture.

Diversification Opportunities for Cardinal Health and Hooker Furniture

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cardinal and Hooker is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of Cardinal Health i.e., Cardinal Health and Hooker Furniture go up and down completely randomly.

Pair Corralation between Cardinal Health and Hooker Furniture

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.51 times more return on investment than Hooker Furniture. However, Cardinal Health is 1.98 times less risky than Hooker Furniture. It trades about 0.07 of its potential returns per unit of risk. Hooker Furniture is currently generating about 0.02 per unit of risk. If you would invest  7,579  in Cardinal Health on September 14, 2024 and sell it today you would earn a total of  4,238  from holding Cardinal Health or generate 55.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Cardinal Health  vs.  Hooker Furniture

 Performance 
       Timeline  
Cardinal Health 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cardinal Health is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Hooker Furniture 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Hooker Furniture are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Hooker Furniture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cardinal Health and Hooker Furniture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cardinal Health and Hooker Furniture

The main advantage of trading using opposite Cardinal Health and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.
The idea behind Cardinal Health and Hooker Furniture pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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