Correlation Between GlaxoSmithKline PLC and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC 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 GlaxoSmithKline PLC and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlaxoSmithKline PLC ADR and Cardinal Health, you can compare the effects of market volatilities on GlaxoSmithKline PLC 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 GlaxoSmithKline PLC with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Cardinal Health.
Diversification Opportunities for GlaxoSmithKline PLC and Cardinal Health
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GlaxoSmithKline and Cardinal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC ADR 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 GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Cardinal Health go up and down completely randomly.
Pair Corralation between GlaxoSmithKline PLC and Cardinal Health
Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 6.81 times less return on investment than Cardinal Health. But when comparing it to its historical volatility, GlaxoSmithKline PLC ADR is 1.11 times less risky than Cardinal Health. It trades about 0.01 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
GlaxoSmithKline PLC ADR vs. Cardinal Health
Performance |
| Timeline |
| GlaxoSmithKline PLC ADR |
| Cardinal Health |
GlaxoSmithKline PLC and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlaxoSmithKline PLC and Cardinal Health
The main advantage of trading using opposite GlaxoSmithKline PLC and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC 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.| GlaxoSmithKline PLC vs. Novartis AG ADR | GlaxoSmithKline PLC vs. AstraZeneca PLC ADR | GlaxoSmithKline PLC vs. Roche Holding Ltd | GlaxoSmithKline PLC vs. Bristol Myers Squibb |
| 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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