Correlation Between Cardinal Health and Transportadora
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Transportadora 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 Transportadora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Transportadora de Gas, you can compare the effects of market volatilities on Cardinal Health and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Transportadora.
Diversification Opportunities for Cardinal Health and Transportadora
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cardinal and Transportadora is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Cardinal Health i.e., Cardinal Health and Transportadora go up and down completely randomly.
Pair Corralation between Cardinal Health and Transportadora
Considering the 90-day investment horizon Cardinal Health is expected to generate 2.86 times less return on investment than Transportadora. But when comparing it to its historical volatility, Cardinal Health is 2.58 times less risky than Transportadora. It trades about 0.08 of its potential returns per unit of risk. Transportadora de Gas is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 913.00 in Transportadora de Gas on August 27, 2024 and sell it today you would earn a total of 2,065 from holding Transportadora de Gas or generate 226.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. Transportadora de Gas
Performance |
| Timeline |
| Cardinal Health |
| Transportadora de Gas |
Cardinal Health and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Transportadora
The main advantage of trading using opposite Cardinal Health and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
| Transportadora vs. Petroleo Brasileiro Petrobras | Transportadora vs. Ecopetrol SA ADR | Transportadora vs. Petrleo Brasileiro SA | Transportadora vs. Equinor ASA ADR |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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