Correlation Between Cardinal Health and Patterson Companies
Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Patterson Companies 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 Patterson Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Patterson Companies, you can compare the effects of market volatilities on Cardinal Health and Patterson Companies 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 Patterson Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Patterson Companies.
Diversification Opportunities for Cardinal Health and Patterson Companies
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cardinal and Patterson is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Cardinal Health i.e., Cardinal Health and Patterson Companies go up and down completely randomly.
Pair Corralation between Cardinal Health and Patterson Companies
Assuming the 90 days horizon Cardinal Health is expected to generate 0.84 times more return on investment than Patterson Companies. However, Cardinal Health is 1.19 times less risky than Patterson Companies. It trades about 0.17 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.11 per unit of risk. If you would invest 10,730 in Cardinal Health on September 3, 2024 and sell it today you would earn a total of 840.00 from holding Cardinal Health or generate 7.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardinal Health vs. Patterson Companies
Performance |
| Timeline |
| Cardinal Health |
| Patterson Companies |
Cardinal Health and Patterson Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardinal Health and Patterson Companies
The main advantage of trading using opposite Cardinal Health and Patterson Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Patterson Companies 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 Patterson Companies will offset losses from the drop in Patterson Companies' long position.| Cardinal Health vs. AmerisourceBergen | Cardinal Health vs. Superior Plus Corp | Cardinal Health vs. NMI Holdings | Cardinal Health vs. Origin Agritech |
| Patterson Companies vs. AmerisourceBergen | Patterson Companies vs. Superior Plus Corp | Patterson Companies vs. NMI Holdings | Patterson Companies vs. Origin Agritech |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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