Correlation Between Cardinal Health and Simulations Plus

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

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

Diversification Opportunities for Cardinal Health and Simulations Plus

0.31

Correlation Coefficient

Cardinal Health  Simulations Plus

Weak diversification

The 3 months correlation between Cardinal and Simulations is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Simulations Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simulations Plus and Cardinal 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 Cardinal Health are associated (or correlated) with Simulations Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simulations Plus has no effect on the direction of Cardinal Health i.e., Cardinal Health and Simulations Plus go up and down completely randomly.

Pair Corralation between Cardinal Health and Simulations Plus

Considering the 90-day investment horizon Cardinal Health is expected to generate 0.46 times more return on investment than Simulations Plus. However, Cardinal Health is 2.16 times less risky than Simulations Plus. It trades about 0.06 of its potential returns per unit of risk. Simulations Plus is currently generating about 0.0 per unit of risk. If you would invest  9,030  in Cardinal Health on January 24, 2024 and sell it today you would earn a total of  1,253  from holding Cardinal Health or generate 13.88% return on investment over 90 days.

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

Cardinal Health  vs.  Simulations Plus

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 fairly strong basic indicators, Cardinal Health is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Simulations Plus

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simulations Plus are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady essential indicators, Simulations Plus reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and Simulations Plus

The main advantage of trading using opposite Cardinal Health and Simulations Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Health position performs unexpectedly, Simulations Plus 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 Simulations Plus will offset losses from the drop in Simulations Plus' long position.

The idea behind Cardinal Health and Simulations Plus 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.