Correlation Between Cardinal Health and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and PepsiCo 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 PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and PepsiCo, you can compare the effects of market volatilities on Cardinal Health and PepsiCo 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 PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and PepsiCo.
Diversification Opportunities for Cardinal Health and PepsiCo
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cardinal and PepsiCo is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo 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 PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of Cardinal Health i.e., Cardinal Health and PepsiCo go up and down completely randomly.
Pair Corralation between Cardinal Health and PepsiCo
Considering the 90-day investment horizon Cardinal Health is expected to generate 1.32 times more return on investment than PepsiCo. However, Cardinal Health is 1.32 times more volatile than PepsiCo. It trades about 0.08 of its potential returns per unit of risk. PepsiCo is currently generating about -0.03 per unit of risk. If you would invest 8,164 in Cardinal Health on August 30, 2024 and sell it today you would earn a total of 4,099 from holding Cardinal Health or generate 50.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. PepsiCo
Performance |
| Timeline |
| Cardinal Health |
| PepsiCo |
Cardinal Health and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and PepsiCo
The main advantage of trading using opposite Cardinal Health and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, PepsiCo 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 PepsiCo will offset losses from the drop in PepsiCo's long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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