Correlation Between Cardinal Health and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and LGI Homes 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 LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and LGI Homes, you can compare the effects of market volatilities on Cardinal Health and LGI Homes 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 LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and LGI Homes.
Diversification Opportunities for Cardinal Health and LGI Homes
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cardinal and LGI is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes 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 LGI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI Homes has no effect on the direction of Cardinal Health i.e., Cardinal Health and LGI Homes go up and down completely randomly.
Pair Corralation between Cardinal Health and LGI Homes
Considering the 90-day investment horizon Cardinal Health is expected to generate 0.5 times more return on investment than LGI Homes. However, Cardinal Health is 1.99 times less risky than LGI Homes. It trades about 0.06 of its potential returns per unit of risk. LGI Homes is currently generating about -0.03 per unit of risk. If you would invest 9,923 in Cardinal Health on September 14, 2024 and sell it today you would earn a total of 1,894 from holding Cardinal Health or generate 19.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. LGI Homes
Performance |
| Timeline |
| Cardinal Health |
| LGI Homes |
Cardinal Health and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and LGI Homes
The main advantage of trading using opposite Cardinal Health and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, LGI Homes 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 LGI Homes will offset losses from the drop in LGI Homes' long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| LGI Homes vs. MI Homes | LGI Homes vs. Taylor Morn Home | LGI Homes vs. TRI Pointe Homes | LGI Homes vs. Beazer Homes USA |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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