Correlation Between NL Industries and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both NL Industries 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 NL Industries and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NL Industries and Cardinal Health, you can compare the effects of market volatilities on NL Industries 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 NL Industries with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of NL Industries and Cardinal Health.
Diversification Opportunities for NL Industries and Cardinal Health
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NL Industries and Cardinal is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NL Industries and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and NL Industries 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 NL Industries 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 NL Industries i.e., NL Industries and Cardinal Health go up and down completely randomly.
Pair Corralation between NL Industries and Cardinal Health
Allowing for the 90-day total investment horizon NL Industries is expected to generate 2.12 times more return on investment than Cardinal Health. However, NL Industries is 2.12 times more volatile than Cardinal Health. It trades about 0.06 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.08 per unit of risk. If you would invest 505.00 in NL Industries on September 4, 2024 and sell it today you would earn a total of 306.00 from holding NL Industries or generate 60.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NL Industries vs. Cardinal Health
Performance |
| Timeline |
| NL Industries |
| Cardinal Health |
NL Industries and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NL Industries and Cardinal Health
The main advantage of trading using opposite NL Industries and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NL Industries 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.| NL Industries vs. Atos SE | NL Industries vs. Deveron Corp | NL Industries vs. Appen Limited | NL Industries vs. Atos Origin SA |
| Cardinal Health vs. Henry Schein | Cardinal Health vs. Owens Minor | Cardinal Health vs. Patterson Companies | Cardinal Health vs. McKesson |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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