Correlation Between Cooper Companies and Cardinal Health

Can any of the company-specific risk be diversified away by investing in both Cooper Companies 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 Cooper Companies and Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Cooper Companies and Cardinal Health, you can compare the effects of market volatilities on Cooper Companies 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 Cooper Companies with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cooper Companies and Cardinal Health.

Diversification Opportunities for Cooper Companies and Cardinal Health

0.59

Correlation Coefficient

Cooper Companies  Cardinal Health

Very weak diversification

The 3 months correlation between Cooper and Cardinal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Cooper Companies and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Cooper Companies 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 The Cooper Companies 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 Cooper Companies i.e., Cooper Companies and Cardinal Health go up and down completely randomly.

Pair Corralation between Cooper Companies and Cardinal Health

Considering the 90-day investment horizon The Cooper Companies is expected to generate 1.15 times more return on investment than Cardinal Health. However, Cooper Companies is 1.15 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 -0.24 per unit of risk. If you would invest  9,168  in The Cooper Companies on February 23, 2024 and sell it today you would earn a total of  276.00  from holding The Cooper Companies or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Cooper Companies  vs.  Cardinal Health

Cooper Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Cooper Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cooper Companies is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Cardinal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardinal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Cooper Companies and Cardinal Health

The main advantage of trading using opposite Cooper Companies and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cooper Companies 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.

The idea behind The Cooper Companies and Cardinal Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..