Correlation Between BRP and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both BRP and Cardinal Health 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 BRP and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Cardinal Health, you can compare the effects of market volatilities on BRP and Cardinal Health 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 BRP with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Cardinal Health.
Diversification Opportunities for BRP and Cardinal Health
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BRP and Cardinal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and BRP 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 BRP Inc are associated (or correlated) with Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of BRP i.e., BRP and Cardinal Health go up and down completely randomly.
Pair Corralation between BRP and Cardinal Health
Given the investment horizon of 90 days BRP Inc is expected to under-perform the Cardinal Health. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.03 times less risky than Cardinal Health. The stock trades about -0.1 of its potential returns per unit of risk. The Cardinal Health is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11,006 in Cardinal Health on August 30, 2024 and sell it today you would earn a total of 1,257 from holding Cardinal Health or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. Cardinal Health
Performance |
| Timeline |
| BRP Inc |
| Cardinal Health |
BRP and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Cardinal Health
The main advantage of trading using opposite BRP and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Cardinal Health 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.The idea behind BRP Inc and Cardinal Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Cardinal Health vs. Humana Inc | Cardinal Health vs. Cigna Corp | Cardinal Health vs. Elevance Health | Cardinal Health vs. Centene Corp |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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