Correlation Between Disney and Cardinal Health

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

Diversification Opportunities for Disney and Cardinal Health

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Disney and Cardinal is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Disney 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 Walt Disney 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 Disney i.e., Disney and Cardinal Health go up and down completely randomly.

Pair Corralation between Disney and Cardinal Health

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Cardinal Health. In addition to that, Disney is 1.17 times more volatile than Cardinal Health. It trades about -0.05 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.06 per unit of volatility. If you would invest  5,059  in Cardinal Health on September 7, 2022 and sell it today you would earn a total of  2,889  from holding Cardinal Health or generate 57.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Walt Disney  vs.  Cardinal Health

 Performance (%) 
       Timeline  
Walt Disney 
Disney Performance
0 of 100
Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2023. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Disney Price Channel

Cardinal Health 
Cardinal Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cardinal Health reported solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Price Channel

Disney and Cardinal Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Disney and Cardinal Health

The main advantage of trading using opposite Disney and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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