Correlation Between Cardinal Health and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and APPLIED MATERIALS 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 APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and APPLIED MATERIALS, you can compare the effects of market volatilities on Cardinal Health and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and APPLIED MATERIALS.
Diversification Opportunities for Cardinal Health and APPLIED MATERIALS
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cardinal and APPLIED is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of Cardinal Health i.e., Cardinal Health and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between Cardinal Health and APPLIED MATERIALS
Assuming the 90 days horizon Cardinal Health is expected to generate 0.62 times more return on investment than APPLIED MATERIALS. However, Cardinal Health is 1.6 times less risky than APPLIED MATERIALS. It trades about 0.08 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.04 per unit of risk. If you would invest 7,479 in Cardinal Health on August 31, 2024 and sell it today you would earn a total of 4,116 from holding Cardinal Health or generate 55.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Cardinal Health vs. APPLIED MATERIALS
Performance |
| Timeline |
| Cardinal Health |
| APPLIED MATERIALS |
Cardinal Health and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and APPLIED MATERIALS
The main advantage of trading using opposite Cardinal Health and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, APPLIED MATERIALS 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 APPLIED MATERIALS will offset losses from the drop in APPLIED MATERIALS's long position.| Cardinal Health vs. China Resources Beer | Cardinal Health vs. AIR PRODCHEMICALS | Cardinal Health vs. GOODYEAR T RUBBER | Cardinal Health vs. APPLIED MATERIALS |
| APPLIED MATERIALS vs. Goodyear Tire Rubber | APPLIED MATERIALS vs. Entravision Communications | APPLIED MATERIALS vs. SBA Communications Corp | APPLIED MATERIALS vs. Ribbon Communications |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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