Correlation Between MCKESSON and Acco Brands

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

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

Diversification Opportunities for MCKESSON and Acco Brands

-0.4

Correlation Coefficient

MCKESSON  Acco Brands

Very good diversification

The 3 months correlation between MCKESSON and Acco is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding MCKESSON P NEW and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands 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 P NEW are associated (or correlated) with Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of MCKESSON i.e., MCKESSON and Acco Brands go up and down completely randomly.

Pair Corralation between MCKESSON and Acco Brands

Assuming the 90 days trading horizon MCKESSON P NEW is expected to under-perform the Acco Brands. But the bond apears to be less risky and, when comparing its historical volatility, MCKESSON P NEW is 12.38 times less risky than Acco Brands. The bond trades about -0.16 of its potential returns per unit of risk. The Acco Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  539.00  in Acco Brands on September 19, 2024 and sell it today you would earn a total of  7.00  from holding Acco Brands or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.06%
Values	Daily Returns

MCKESSON P NEW  vs.  Acco Brands

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.

Acco Brands

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Acco Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Acco Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MCKESSON and Acco Brands

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

The idea behind MCKESSON P NEW and Acco Brands 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.