Correlation Between Cardinal Health and Beacon Roofing

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Can any of the company-specific risk be diversified away by investing in both Cardinal Health and Beacon Roofing 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 Beacon Roofing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardinal Health and Beacon Roofing Suppl, you can compare the effects of market volatilities on Cardinal Health and Beacon Roofing 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 Beacon Roofing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and Beacon Roofing.

Diversification Opportunities for Cardinal Health and Beacon Roofing

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Cardinal and Beacon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and Beacon Roofing Suppl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beacon Roofing Suppl 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 Beacon Roofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beacon Roofing Suppl has no effect on the direction of Cardinal Health i.e., Cardinal Health and Beacon Roofing go up and down completely randomly.

Pair Corralation between Cardinal Health and Beacon Roofing

If you would invest  5,474  in Cardinal Health on May 17, 2022 and sell it today you would earn a total of  1,523  from holding Cardinal Health or generate 27.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy4.76%
ValuesDaily Returns

Cardinal Health  vs.  Beacon Roofing Suppl

 Performance (%) 
       Timeline  
Cardinal Health 
Cardinal Performance
17 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Price Channel

Beacon Roofing Suppl 
Beacon Performance
0 of 100
Over the last 90 days Beacon Roofing Suppl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Beacon Roofing is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Cardinal Health and Beacon Roofing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cardinal Health and Beacon Roofing

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

Beacon Roofing Suppl

Pair trading matchups for Beacon Roofing

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Beacon Roofing as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Beacon Roofing's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Beacon Roofing's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Beacon Roofing Suppl.
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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