Correlation Between Westinghouse Air and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air 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 Westinghouse Air and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westinghouse Air Brake and Cardinal Health, you can compare the effects of market volatilities on Westinghouse Air 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 Westinghouse Air with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Cardinal Health.
Diversification Opportunities for Westinghouse Air and Cardinal Health
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Westinghouse and Cardinal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Westinghouse Air 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 Westinghouse Air Brake 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 Westinghouse Air i.e., Westinghouse Air and Cardinal Health go up and down completely randomly.
Pair Corralation between Westinghouse Air and Cardinal Health
Assuming the 90 days horizon Westinghouse Air is expected to generate 1.14 times less return on investment than Cardinal Health. But when comparing it to its historical volatility, Westinghouse Air Brake is 1.38 times less risky than Cardinal Health. It trades about 0.25 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 9,743 in Cardinal Health on August 31, 2024 and sell it today you would earn a total of 1,852 from holding Cardinal Health or generate 19.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. Cardinal Health
Performance |
| Timeline |
| Westinghouse Air Brake |
| Cardinal Health |
Westinghouse Air and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Cardinal Health
The main advantage of trading using opposite Westinghouse Air and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air 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.| Westinghouse Air vs. Union Pacific | Westinghouse Air vs. Superior Plus Corp | Westinghouse Air vs. NMI Holdings | Westinghouse Air vs. Origin Agritech |
| Cardinal Health vs. China Resources Beer | Cardinal Health vs. AIR PRODCHEMICALS | Cardinal Health vs. GOODYEAR T RUBBER | Cardinal Health vs. APPLIED MATERIALS |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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