Correlation Between Beazer Homes and Cardinal Health

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

By analyzing existing cross correlation between Beazer Homes USA and Cardinal Health, you can compare the effects of market volatilities on Beazer Homes 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 Beazer Homes with a short position of Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Cardinal Health.

Diversification Opportunities for Beazer Homes and Cardinal Health

-0.11

Correlation Coefficient

Beazer Homes  Cardinal Health

Good diversification

The 3 months correlation between Beazer and Cardinal is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health and Beazer Homes 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 Beazer Homes USA 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 Beazer Homes i.e., Beazer Homes and Cardinal Health go up and down completely randomly.

Pair Corralation between Beazer Homes and Cardinal Health

Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 2.96 times more return on investment than Cardinal Health. However, Beazer Homes is 2.96 times more volatile than Cardinal Health. It trades about 0.23 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.22 per unit of risk. If you would invest  1,887  in Beazer Homes USA on April 24, 2025 and sell it today you would earn a total of  587.00  from holding Beazer Homes USA or generate 31.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.73%
Values	Daily Returns

Beazer Homes USA  vs.  Cardinal Health

Beazer Homes USA

Risk-Adjusted Performance

Solid

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Beazer Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cardinal Health

Risk-Adjusted Performance

Solid

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. In spite of comparatively uncertain basic indicators, Cardinal Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beazer Homes and Cardinal Health

The main advantage of trading using opposite Beazer Homes and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes 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.

The idea behind Beazer Homes USA 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.