Correlation Between Cardinal Health and Henry Schein

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

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

Diversification Opportunities for Cardinal Health and Henry Schein

0.44

Correlation Coefficient

Cardinal Health  Henry Schein

Very weak diversification

The 3 months correlation between Cardinal and Henry is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Henry Schein in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henry Schein 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 Henry Schein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henry Schein has no effect on the direction of Cardinal Health i.e., Cardinal Health and Henry Schein go up and down completely randomly.

Pair Corralation between Cardinal Health and Henry Schein

Considering the 90-day investment horizon Cardinal Health is expected to under-perform the Henry Schein. In addition to that, Cardinal Health is 1.11 times more volatile than Henry Schein. It trades about -0.3 of its total potential returns per unit of risk. Henry Schein is currently generating about -0.2 per unit of volatility. If you would invest  7,247  in Henry Schein on February 7, 2024 and sell it today you would lose (469.00) from holding Henry Schein or give up 6.47% of portfolio value over 90 days.

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

Cardinal Health  vs.  Henry Schein

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.

Henry Schein

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henry Schein has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cardinal Health and Henry Schein

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

The idea behind Cardinal Health and Henry Schein 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.