Correlation Between Grupo Hotelero and McKesson

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

By analyzing existing cross correlation between Grupo Hotelero Santa and McKesson, you can compare the effects of market volatilities on Grupo Hotelero 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 Grupo Hotelero with a short position of McKesson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Hotelero and McKesson.

Diversification Opportunities for Grupo Hotelero and McKesson

-0.21

Correlation Coefficient

Grupo Hotelero  McKesson

Very good diversification

The 3 months correlation between Grupo and McKesson is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and McKesson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McKesson and Grupo Hotelero 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 Grupo Hotelero Santa 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 Grupo Hotelero i.e., Grupo Hotelero and McKesson go up and down completely randomly.

Pair Corralation between Grupo Hotelero and McKesson

Assuming the 90 days trading horizon Grupo Hotelero is expected to generate 1.67 times less return on investment than McKesson. In addition to that, Grupo Hotelero is 124.01 times more volatile than McKesson. It trades about 0.0 of its total potential returns per unit of risk. McKesson is currently generating about 0.13 per unit of volatility. If you would invest  1,198,119  in McKesson on December 22, 2024 and sell it today you would earn a total of  1,449  from holding McKesson or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Grupo Hotelero Santa  vs.  McKesson

Grupo Hotelero Santa

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Hotelero Santa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Grupo Hotelero is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

McKesson

Risk-Adjusted Performance

OK

Over the last 90 days McKesson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, McKesson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Grupo Hotelero and McKesson

The main advantage of trading using opposite Grupo Hotelero and McKesson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Hotelero 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.

The idea behind Grupo Hotelero Santa and McKesson 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.