Correlation Between Chevron Corp and Cardinal Health

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

Diversification Opportunities for Chevron Corp and Cardinal Health

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Chevron and Cardinal is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Chevron Corp 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 Chevron Corp are associated (or correlated) with Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Chevron Corp i.e., Chevron Corp and Cardinal Health go up and down completely randomly.

Pair Corralation between Chevron Corp and Cardinal Health

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.08 times more return on investment than Cardinal Health. However, Chevron Corp is 1.08 times more volatile than Cardinal Health. It trades about 0.1 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.07 per unit of risk. If you would invest  8,203  in Chevron Corp on September 4, 2022 and sell it today you would earn a total of  9,900  from holding Chevron Corp or generate 120.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Chevron Corp  vs.  Cardinal Health

 Performance (%) 
       Timeline  
Chevron Corp 
Chevron Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Chevron Price Channel

Cardinal Health 
Cardinal Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Price Channel

Chevron Corp and Cardinal Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and Cardinal Health

The main advantage of trading using opposite Chevron Corp and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Cardinal Health 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.
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The idea behind Chevron Corp and Cardinal Health 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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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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