Correlation Between ATT and Cardinal Health

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

Diversification Opportunities for ATT and Cardinal Health

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ATT and Cardinal is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and ATT 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 ATT Inc 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 ATT i.e., ATT and Cardinal Health go up and down completely randomly.

Pair Corralation between ATT and Cardinal Health

Taking into account the 90-day investment horizon ATT is expected to generate 1.5 times less return on investment than Cardinal Health. But when comparing it to its historical volatility, ATT Inc is 1.96 times less risky than Cardinal Health. It trades about 0.24 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,567  in Cardinal Health on September 4, 2022 and sell it today you would earn a total of  521.00  from holding Cardinal Health or generate 6.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  Cardinal Health

 Performance (%) 
       Timeline  
ATT Inc 
ATT Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

ATT 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

ATT and Cardinal Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Cardinal Health

The main advantage of trading using opposite ATT and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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