Correlation Between CARDINAL HEALTH and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both CARDINAL HEALTH and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARDINAL HEALTH and IMPERIAL TOBACCO , you can compare the effects of market volatilities on CARDINAL HEALTH and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARDINAL HEALTH and IMPERIAL TOBACCO.
Diversification Opportunities for CARDINAL HEALTH and IMPERIAL TOBACCO
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CARDINAL and IMPERIAL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CARDINAL HEALTH and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of CARDINAL HEALTH i.e., CARDINAL HEALTH and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between CARDINAL HEALTH and IMPERIAL TOBACCO
Assuming the 90 days trading horizon CARDINAL HEALTH is expected to generate 1.08 times more return on investment than IMPERIAL TOBACCO. However, CARDINAL HEALTH is 1.08 times more volatile than IMPERIAL TOBACCO . It trades about 0.43 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.26 per unit of risk. If you would invest 11,410 in CARDINAL HEALTH on November 3, 2024 and sell it today you would earn a total of 910.00 from holding CARDINAL HEALTH or generate 7.98% 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. IMPERIAL TOBACCO
Performance |
| Timeline |
| CARDINAL HEALTH |
| IMPERIAL TOBACCO |
CARDINAL HEALTH and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CARDINAL HEALTH and IMPERIAL TOBACCO
The main advantage of trading using opposite CARDINAL HEALTH and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARDINAL HEALTH position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| CARDINAL HEALTH vs. Apple Inc | CARDINAL HEALTH vs. Apple Inc | CARDINAL HEALTH vs. Apple Inc | CARDINAL HEALTH vs. Apple Inc |
| IMPERIAL TOBACCO vs. RCI Hospitality Holdings | IMPERIAL TOBACCO vs. CARDINAL HEALTH | IMPERIAL TOBACCO vs. Cal Maine Foods | IMPERIAL TOBACCO vs. Waste Management |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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