Correlation Between Elevance Health and Cardinal Health

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

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

Diversification Opportunities for Elevance Health and Cardinal Health

-0.73

Correlation Coefficient

Elevance Health  Cardinal Health

Pay attention - limited upside

The 3 months correlation between Elevance and Cardinal is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Elevance Health and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Elevance Health 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 Elevance Health 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 Elevance Health i.e., Elevance Health and Cardinal Health go up and down completely randomly.

Pair Corralation between Elevance Health and Cardinal Health

Considering the 90-day investment horizon Elevance Health is expected to generate 1.08 times more return on investment than Cardinal Health. However, Elevance Health is 1.08 times more volatile than Cardinal Health. It trades about 0.05 of its potential returns per unit of risk. Cardinal Health is currently generating about -0.08 per unit of risk. If you would invest  52,484  in Elevance Health on March 2, 2024 and sell it today you would earn a total of  727.06  from holding Elevance Health or generate 1.39% return on investment over 90 days.

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

Elevance Health  vs.  Cardinal Health

Elevance Health

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elevance Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Elevance Health may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Elevance Health and Cardinal Health

The main advantage of trading using opposite Elevance Health and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elevance Health 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 Elevance Health 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.