Correlation Between Tower Semiconductor and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor 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 Tower Semiconductor and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and Cardinal Health, you can compare the effects of market volatilities on Tower Semiconductor 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 Tower Semiconductor with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and Cardinal Health.
Diversification Opportunities for Tower Semiconductor and Cardinal Health
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tower and Cardinal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor i.e., Tower Semiconductor and Cardinal Health go up and down completely randomly.
Pair Corralation between Tower Semiconductor and Cardinal Health
Assuming the 90 days horizon Tower Semiconductor is expected to generate 1.71 times more return on investment than Cardinal Health. However, Tower Semiconductor is 1.71 times more volatile than Cardinal Health. It trades about 0.15 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.24 per unit of risk. If you would invest 4,100 in Tower Semiconductor on August 27, 2024 and sell it today you would earn a total of 549.00 from holding Tower Semiconductor or generate 13.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Semiconductor vs. Cardinal Health
Performance |
| Timeline |
| Tower Semiconductor |
| Cardinal Health |
Tower Semiconductor and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and Cardinal Health
The main advantage of trading using opposite Tower Semiconductor and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor 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.| Tower Semiconductor vs. NVIDIA | Tower Semiconductor vs. NVIDIA | Tower Semiconductor vs. QUALCOMM Incorporated | Tower Semiconductor vs. Intel |
| Cardinal Health vs. Westinghouse Air Brake | Cardinal Health vs. CompuGroup Medical SE | Cardinal Health vs. Chongqing Machinery Electric | Cardinal Health vs. DELTA AIR LINES |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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