Correlation Between McKesson and Cencora
Can any of the company-specific risk be diversified away by investing in both McKesson and Cencora 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 Cencora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McKesson and Cencora, you can compare the effects of market volatilities on McKesson and Cencora 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 Cencora. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Cencora.
Diversification Opportunities for McKesson and Cencora
Very poor diversification
The 3 months correlation between McKesson and Cencora is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Cencora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cencora 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 Cencora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cencora has no effect on the direction of McKesson i.e., McKesson and Cencora go up and down completely randomly.
Pair Corralation between McKesson and Cencora
Considering the 90-day investment horizon McKesson is expected to generate 1.35 times more return on investment than Cencora. However, McKesson is 1.35 times more volatile than Cencora. It trades about 0.07 of its potential returns per unit of risk. Cencora is currently generating about 0.07 per unit of risk. If you would invest 37,783 in McKesson on September 12, 2024 and sell it today you would earn a total of 20,417 from holding McKesson or generate 54.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
McKesson vs. Cencora
Performance |
| Timeline |
| McKesson |
| Cencora |
McKesson and Cencora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McKesson and Cencora
The main advantage of trading using opposite McKesson and Cencora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Cencora 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 Cencora will offset losses from the drop in Cencora's long position.| McKesson vs. Cardinal Health | McKesson vs. Henry Schein | McKesson vs. Patterson Companies | McKesson vs. Owens Minor |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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