Correlation Between Cardinal Health and Smith Nephew
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Smith Nephew 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 Smith Nephew into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Smith Nephew SNATS, you can compare the effects of market volatilities on Cardinal Health and Smith Nephew 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 Smith Nephew. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Smith Nephew.
Diversification Opportunities for Cardinal Health and Smith Nephew
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cardinal and Smith is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Cardinal Health i.e., Cardinal Health and Smith Nephew go up and down completely randomly.
Pair Corralation between Cardinal Health and Smith Nephew
Considering the 90-day investment horizon Cardinal Health is expected to generate 0.75 times more return on investment than Smith Nephew. However, Cardinal Health is 1.34 times less risky than Smith Nephew. It trades about 0.2 of its potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.18 per unit of risk. If you would invest 11,087 in Cardinal Health on August 27, 2024 and sell it today you would earn a total of 1,097 from holding Cardinal Health or generate 9.89% 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. Smith Nephew SNATS
Performance |
| Timeline |
| Cardinal Health |
| Smith Nephew SNATS |
Cardinal Health and Smith Nephew Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Smith Nephew
The main advantage of trading using opposite Cardinal Health and Smith Nephew positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Smith Nephew 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 Smith Nephew will offset losses from the drop in Smith Nephew's long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| Smith Nephew vs. CochLear Ltd ADR | Smith Nephew vs. Integer Holdings Corp | Smith Nephew vs. Orthofix Medical | Smith Nephew vs. Glaukos Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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