Correlation Between McKesson and Boeing
Can any of the company-specific risk be diversified away by investing in both McKesson and Boeing 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 Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McKesson and The Boeing, you can compare the effects of market volatilities on McKesson and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Boeing.
Diversification Opportunities for McKesson and Boeing
Almost no diversification
The 3 months correlation between McKesson and Boeing is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of McKesson i.e., McKesson and Boeing go up and down completely randomly.
Pair Corralation between McKesson and Boeing
Assuming the 90 days trading horizon McKesson is expected to generate 2.25 times less return on investment than Boeing. In addition to that, McKesson is 1.08 times more volatile than The Boeing. It trades about 0.03 of its total potential returns per unit of risk. The Boeing is currently generating about 0.08 per unit of volatility. If you would invest 318,500 in The Boeing on November 2, 2024 and sell it today you would earn a total of 47,500 from holding The Boeing or generate 14.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.03% |
| Values | Daily Returns |
McKesson vs. The Boeing
Performance |
| Timeline |
| McKesson |
| Boeing |
McKesson and Boeing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McKesson and Boeing
The main advantage of trading using opposite McKesson and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.| McKesson vs. Honeywell International | McKesson vs. Fideicomiso Irrevocable No | McKesson vs. Royal Caribbean Group | McKesson vs. The Walt Disney |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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