Correlation Between Cardinal Health and Aspen Aerogels

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

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

Diversification Opportunities for Cardinal Health and Aspen Aerogels

0.54

Correlation Coefficient

Cardinal Health  Aspen Aerogels

Very weak diversification

The 3 months correlation between Cardinal and Aspen is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels 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 Aspen Aerogels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Aerogels has no effect on the direction of Cardinal Health i.e., Cardinal Health and Aspen Aerogels go up and down completely randomly.

Pair Corralation between Cardinal Health and Aspen Aerogels

Considering the 90-day investment horizon Cardinal Health is expected to under-perform the Aspen Aerogels. But the stock apears to be less risky and, when comparing its historical volatility, Cardinal Health is 2.4 times less risky than Aspen Aerogels. The stock trades about -0.28 of its potential returns per unit of risk. The Aspen Aerogels is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,763  in Aspen Aerogels on January 29, 2024 and sell it today you would lose (153.00) from holding Aspen Aerogels or give up 8.68% of portfolio value over 90 days.

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

Cardinal Health  vs.  Aspen Aerogels

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.

Aspen Aerogels

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Aerogels are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aspen Aerogels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and Aspen Aerogels

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

The idea behind Cardinal Health and Aspen Aerogels 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 Commodity Directory module to find actively traded commodities issued by global exchanges.