Correlation Between Dupont De and MCKESSON

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

By analyzing existing cross correlation between Dupont De Nemours and MCKESSON P NEW, you can compare the effects of market volatilities on Dupont De and MCKESSON 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 Dupont De with a short position of MCKESSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and MCKESSON.

Diversification Opportunities for Dupont De and MCKESSON

0.6

Correlation Coefficient

Dupont De  MCKESSON

Poor diversification

The 3 months correlation between Dupont and MCKESSON is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and MCKESSON P NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCKESSON P NEW and Dupont De 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 Dupont De Nemours are associated (or correlated) with MCKESSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCKESSON P NEW has no effect on the direction of Dupont De i.e., Dupont De and MCKESSON go up and down completely randomly.

Pair Corralation between Dupont De and MCKESSON

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 2.02 times more return on investment than MCKESSON. However, Dupont De is 2.02 times more volatile than MCKESSON P NEW. It trades about 0.03 of its potential returns per unit of risk. MCKESSON P NEW is currently generating about 0.01 per unit of risk. If you would invest  6,599  in Dupont De Nemours on September 20, 2024 and sell it today you would earn a total of  1,143  from holding Dupont De Nemours or generate 17.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.04%
Values	Daily Returns

Dupont De Nemours  vs.  MCKESSON P NEW

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

MCKESSON P NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCKESSON P NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MCKESSON is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dupont De and MCKESSON

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

The idea behind Dupont De Nemours and MCKESSON P NEW 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.