Correlation Between CARDINAL HEALTH and Preferred Bank
Can any of the company-specific risk be diversified away by investing in both CARDINAL HEALTH and Preferred Bank 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 Preferred Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARDINAL HEALTH and Preferred Bank, you can compare the effects of market volatilities on CARDINAL HEALTH and Preferred Bank 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 Preferred Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARDINAL HEALTH and Preferred Bank.
Diversification Opportunities for CARDINAL HEALTH and Preferred Bank
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CARDINAL and Preferred is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank 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 Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of CARDINAL HEALTH i.e., CARDINAL HEALTH and Preferred Bank go up and down completely randomly.
Pair Corralation between CARDINAL HEALTH and Preferred Bank
Assuming the 90 days trading horizon CARDINAL HEALTH is expected to generate 0.46 times more return on investment than Preferred Bank. However, CARDINAL HEALTH is 2.16 times less risky than Preferred Bank. It trades about 0.68 of its potential returns per unit of risk. Preferred Bank is currently generating about -0.03 per unit of risk. If you would invest 11,359 in CARDINAL HEALTH on October 29, 2024 and sell it today you would earn a total of 971.00 from holding CARDINAL HEALTH or generate 8.55% 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. Preferred Bank
Performance |
| Timeline |
| CARDINAL HEALTH |
| Preferred Bank |
CARDINAL HEALTH and Preferred Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARDINAL HEALTH and Preferred Bank
The main advantage of trading using opposite CARDINAL HEALTH and Preferred Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARDINAL HEALTH position performs unexpectedly, Preferred Bank 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 Preferred Bank will offset losses from the drop in Preferred Bank's long position.| CARDINAL HEALTH vs. Apple Inc | CARDINAL HEALTH vs. Apple Inc | CARDINAL HEALTH vs. Apple Inc | CARDINAL HEALTH vs. Apple Inc |
| Preferred Bank vs. POSBO UNSPADRS20YC1 | Preferred Bank vs. Postal Savings Bank | Preferred Bank vs. Truist Financial | Preferred Bank vs. OVERSEA CHINUNSPADR2 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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