Correlation Between Cardinal Health and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Spirent Communications 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 Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Spirent Communications plc, you can compare the effects of market volatilities on Cardinal Health and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Spirent Communications.
Diversification Opportunities for Cardinal Health and Spirent Communications
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cardinal and Spirent is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Cardinal Health i.e., Cardinal Health and Spirent Communications go up and down completely randomly.
Pair Corralation between Cardinal Health and Spirent Communications
Assuming the 90 days horizon Cardinal Health is expected to generate 0.36 times more return on investment than Spirent Communications. However, Cardinal Health is 2.77 times less risky than Spirent Communications. It trades about 0.06 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.01 per unit of risk. If you would invest 7,218 in Cardinal Health on September 13, 2024 and sell it today you would earn a total of 3,952 from holding Cardinal Health or generate 54.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. Spirent Communications plc
Performance |
| Timeline |
| Cardinal Health |
| Spirent Communications |
Cardinal Health and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Spirent Communications
The main advantage of trading using opposite Cardinal Health and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Cardinal Health vs. Henry Schein | Cardinal Health vs. Superior Plus Corp | Cardinal Health vs. NMI Holdings | Cardinal Health vs. SIVERS SEMICONDUCTORS AB |
| Spirent Communications vs. Superior Plus Corp | Spirent Communications vs. SIVERS SEMICONDUCTORS AB | Spirent Communications vs. Norsk Hydro ASA | Spirent Communications vs. Reliance Steel Aluminum |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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