Correlation Between McKesson and AmerisourceBergen

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

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

Diversification Opportunities for McKesson and AmerisourceBergen

0.63

Correlation Coefficient

McKesson  AmerisourceBergen

Poor diversification

The 3 months correlation between McKesson and AmerisourceBergen is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and AmerisourceBergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmerisourceBergen 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 AmerisourceBergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmerisourceBergen has no effect on the direction of McKesson i.e., McKesson and AmerisourceBergen go up and down completely randomly.

Pair Corralation between McKesson and AmerisourceBergen

If you would invest  56,108  in McKesson on August 30, 2024 and sell it today you would earn a total of  6,530  from holding McKesson or generate 11.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

McKesson  vs.  AmerisourceBergen

McKesson

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McKesson are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, McKesson may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AmerisourceBergen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with McKesson and AmerisourceBergen

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

The idea behind McKesson and AmerisourceBergen 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.