Correlation Between Cardinal Health and NXP Semiconductors

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

By analyzing existing cross correlation between Cardinal Health and NXP Semiconductors NV, you can compare the effects of market volatilities on Cardinal Health and NXP Semiconductors 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 NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Health and NXP Semiconductors.

Diversification Opportunities for Cardinal Health and NXP Semiconductors

0.75

Correlation Coefficient

Cardinal Health  NXP Semiconductors

Poor diversification

The 3 months correlation between Cardinal and NXP is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Health and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors 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 NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Cardinal Health i.e., Cardinal Health and NXP Semiconductors go up and down completely randomly.

Pair Corralation between Cardinal Health and NXP Semiconductors

Assuming the 90 days horizon Cardinal Health is expected to generate 0.61 times more return on investment than NXP Semiconductors. However, Cardinal Health is 1.65 times less risky than NXP Semiconductors. It trades about 0.16 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.1 per unit of risk. If you would invest  11,759  in Cardinal Health on April 24, 2025 and sell it today you would earn a total of  1,831  from holding Cardinal Health or generate 15.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cardinal Health  vs.  NXP Semiconductors NV

Cardinal Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 12 (%) 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.

NXP Semiconductors

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NXP Semiconductors NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NXP Semiconductors unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardinal Health and NXP Semiconductors

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

The idea behind Cardinal Health and NXP Semiconductors NV 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..