Correlation Between McKesson and Southern Copper
Can any of the company-specific risk be diversified away by investing in both McKesson and Southern Copper 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 McKesson and Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McKesson and Southern Copper, you can compare the effects of market volatilities on McKesson and Southern Copper 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 McKesson with a short position of Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Southern Copper.
Diversification Opportunities for McKesson and Southern Copper
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between McKesson and Southern is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper and McKesson 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 McKesson are associated (or correlated) with Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of McKesson i.e., McKesson and Southern Copper go up and down completely randomly.
Pair Corralation between McKesson and Southern Copper
Assuming the 90 days trading horizon McKesson is expected to generate 1.26 times more return on investment than Southern Copper. However, McKesson is 1.26 times more volatile than Southern Copper. It trades about 0.15 of its potential returns per unit of risk. Southern Copper is currently generating about 0.07 per unit of risk. If you would invest 976,194 in McKesson on September 25, 2024 and sell it today you would earn a total of 223,374 from holding McKesson or generate 22.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
McKesson vs. Southern Copper
Performance |
Timeline |
McKesson |
Southern Copper |
McKesson and Southern Copper Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with McKesson and Southern Copper
The main advantage of trading using opposite McKesson and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.McKesson vs. Delta Air Lines | McKesson vs. United States Steel | McKesson vs. Martin Marietta Materials | McKesson vs. United Airlines Holdings |
Southern Copper vs. Freeport McMoRan | Southern Copper vs. Bolsa Mexicana de | Southern Copper vs. ATT Inc | Southern Copper vs. Monster Beverage Corp |
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 the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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