Correlation Between Ford and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Cardinal Health, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Cardinal Health.
Diversification Opportunities for Ford and Cardinal Health
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Cardinal is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Ford 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 Ford Motor 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 Ford i.e., Ford and Cardinal Health go up and down completely randomly.
Pair Corralation between Ford and Cardinal Health
Taking into account the 90-day investment horizon Ford is expected to generate 4.42 times less return on investment than Cardinal Health. In addition to that, Ford is 1.57 times more volatile than Cardinal Health. It trades about 0.01 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.07 per unit of volatility. If you would invest 7,649 in Cardinal Health on August 24, 2024 and sell it today you would earn a total of 4,743 from holding Cardinal Health or generate 62.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Ford Motor vs. Cardinal Health
Performance |
| Timeline |
| Ford Motor |
| Cardinal Health |
Ford and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Cardinal Health
The main advantage of trading using opposite Ford and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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. Quadrise Plc | Cardinal Health vs. Intuitive Investments Group | Cardinal Health vs. European Metals Holdings | Cardinal Health vs. Athelney Trust plc |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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