Correlation Between United Fire and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both United Fire 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 United Fire and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Fire Group and Cardinal Health, you can compare the effects of market volatilities on United Fire 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 United Fire with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Cardinal Health.
Diversification Opportunities for United Fire and Cardinal Health
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Cardinal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and United Fire 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 United Fire Group 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 United Fire i.e., United Fire and Cardinal Health go up and down completely randomly.
Pair Corralation between United Fire and Cardinal Health
Given the investment horizon of 90 days United Fire is expected to generate 1.52 times less return on investment than Cardinal Health. In addition to that, United Fire is 1.82 times more volatile than Cardinal Health. It trades about 0.03 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.08 per unit of volatility. If you would invest 7,494 in Cardinal Health on September 3, 2024 and sell it today you would earn a total of 4,753 from holding Cardinal Health or generate 63.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Cardinal Health
Performance |
| Timeline |
| United Fire Group |
| Cardinal Health |
United Fire and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Cardinal Health
The main advantage of trading using opposite United Fire and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire 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.| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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