Correlation Between Cardinal Health and H2O Retailing
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and H2O Retailing 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 H2O Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and H2O Retailing, you can compare the effects of market volatilities on Cardinal Health and H2O Retailing 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 H2O Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and H2O Retailing.
Diversification Opportunities for Cardinal Health and H2O Retailing
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cardinal and H2O is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and H2O Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H2O Retailing 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 H2O Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H2O Retailing has no effect on the direction of Cardinal Health i.e., Cardinal Health and H2O Retailing go up and down completely randomly.
Pair Corralation between Cardinal Health and H2O Retailing
Assuming the 90 days horizon Cardinal Health is expected to generate 1.2 times more return on investment than H2O Retailing. However, Cardinal Health is 1.2 times more volatile than H2O Retailing. It trades about 0.21 of its potential returns per unit of risk. H2O Retailing is currently generating about 0.08 per unit of risk. If you would invest 11,400 in Cardinal Health on November 3, 2024 and sell it today you would earn a total of 840.00 from holding Cardinal Health or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. H2O Retailing
Performance |
| Timeline |
| Cardinal Health |
| H2O Retailing |
Cardinal Health and H2O Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and H2O Retailing
The main advantage of trading using opposite Cardinal Health and H2O Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, H2O Retailing 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 H2O Retailing will offset losses from the drop in H2O Retailing's long position.| Cardinal Health vs. Beta Systems Software | Cardinal Health vs. UNITED UTILITIES GR | Cardinal Health vs. NORTHEAST UTILITIES | Cardinal Health vs. PSI Software AG |
| H2O Retailing vs. MHP Hotel AG | H2O Retailing vs. COVIVIO HOTELS INH | H2O Retailing vs. DALATA HOTEL | H2O Retailing vs. CENTURIA OFFICE REIT |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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