Correlation Between Carsales and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Cardinal Health, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Cardinal Health.
Diversification Opportunities for Carsales and Cardinal Health
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carsales and Cardinal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Carsales 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 CarsalesCom 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 Carsales i.e., Carsales and Cardinal Health go up and down completely randomly.
Pair Corralation between Carsales and Cardinal Health
Assuming the 90 days horizon CarsalesCom is expected to generate 1.04 times more return on investment than Cardinal Health. However, Carsales is 1.04 times more volatile than Cardinal Health. It trades about 0.09 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.06 per unit of risk. If you would invest 1,338 in CarsalesCom on August 24, 2024 and sell it today you would earn a total of 1,162 from holding CarsalesCom or generate 86.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Cardinal Health
Performance |
| Timeline |
| CarsalesCom |
| Cardinal Health |
Carsales and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Cardinal Health
The main advantage of trading using opposite Carsales and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.| Carsales vs. Gruppo Mutuionline SpA | Carsales vs. BURLINGTON STORES | Carsales vs. Caseys General Stores | Carsales vs. COSTCO WHOLESALE CDR |
| Cardinal Health vs. Shanghai Pharmaceuticals Holding | Cardinal Health vs. Sinopharm Group Co | Cardinal Health vs. Superior Plus Corp | Cardinal Health vs. NMI Holdings |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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