Correlation Between McKesson and Patterson Companies
Can any of the company-specific risk be diversified away by investing in both McKesson and Patterson Companies 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 Patterson Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McKesson and Patterson Companies, you can compare the effects of market volatilities on McKesson and Patterson Companies 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 Patterson Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Patterson Companies.
Diversification Opportunities for McKesson and Patterson Companies
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between McKesson and Patterson is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of McKesson i.e., McKesson and Patterson Companies go up and down completely randomly.
Pair Corralation between McKesson and Patterson Companies
Considering the 90-day investment horizon McKesson is expected to generate 0.71 times more return on investment than Patterson Companies. However, McKesson is 1.4 times less risky than Patterson Companies. It trades about 0.08 of its potential returns per unit of risk. Patterson Companies is currently generating about -0.02 per unit of risk. If you would invest 37,890 in McKesson on August 24, 2024 and sell it today you would earn a total of 24,937 from holding McKesson or generate 65.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McKesson vs. Patterson Companies
Performance |
| Timeline |
| McKesson |
| Patterson Companies |
McKesson and Patterson Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McKesson and Patterson Companies
The main advantage of trading using opposite McKesson and Patterson Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Patterson Companies 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 Patterson Companies will offset losses from the drop in Patterson Companies' long position.| McKesson vs. Cardinal Health | McKesson vs. Henry Schein | McKesson vs. Patterson Companies | McKesson vs. Owens Minor |
| Patterson Companies vs. Owens Minor | Patterson Companies vs. Cardinal Health | Patterson Companies vs. McKesson | Patterson Companies vs. Henry Schein |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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