Correlation Between Cardinal Health and Wynn Resorts

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

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

Diversification Opportunities for Cardinal Health and Wynn Resorts

0.26

Correlation Coefficient

Cardinal Health  Wynn Resorts

Modest diversification

The 3 months correlation between Cardinal and Wynn is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Wynn Resorts Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wynn Resorts Limited 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 Wynn Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wynn Resorts Limited has no effect on the direction of Cardinal Health i.e., Cardinal Health and Wynn Resorts go up and down completely randomly.

Pair Corralation between Cardinal Health and Wynn Resorts

Considering the 90-day investment horizon Cardinal Health is expected to under-perform the Wynn Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Cardinal Health is 2.0 times less risky than Wynn Resorts. The stock trades about -0.29 of its potential returns per unit of risk. The Wynn Resorts Limited is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  10,008  in Wynn Resorts Limited on January 20, 2024 and sell it today you would lose (398.00) from holding Wynn Resorts Limited or give up 3.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Cardinal Health  vs.  Wynn Resorts Limited

Cardinal Health

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cardinal Health is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Wynn Resorts Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wynn Resorts Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Wynn Resorts is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Health and Wynn Resorts

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

The idea behind Cardinal Health and Wynn Resorts Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.