Correlation Between United States and McKesson
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and McKesson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and McKesson, you can compare the effects of market volatilities on United States 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 United States with a short position of McKesson. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and McKesson.
Diversification Opportunities for United States and McKesson
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and McKesson is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and McKesson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McKesson and United States 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 United States Steel 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 has no effect on the direction of United States i.e., United States and McKesson go up and down completely randomly.
Pair Corralation between United States and McKesson
Given the investment horizon of 90 days United States Steel is expected to under-perform the McKesson. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.14 times less risky than McKesson. The stock trades about -0.39 of its potential returns per unit of risk. The McKesson is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,017,746 in McKesson on September 26, 2024 and sell it today you would earn a total of 181,822 from holding McKesson or generate 17.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
United States Steel vs. McKesson
Performance |
Timeline |
United States Steel |
McKesson |
United States and McKesson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United States and McKesson
The main advantage of trading using opposite United States and McKesson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.United States vs. Steel Dynamics | United States vs. Gerdau SA | United States vs. Ternium SA | United States vs. Grupo Simec SAB |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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