Correlation Between McKesson and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both McKesson and Procter Gamble 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 Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McKesson and Procter Gamble DRC, you can compare the effects of market volatilities on McKesson and Procter Gamble 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 Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Procter Gamble.
Diversification Opportunities for McKesson and Procter Gamble
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between McKesson and Procter is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Procter Gamble DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble DRC 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble DRC has no effect on the direction of McKesson i.e., McKesson and Procter Gamble go up and down completely randomly.
Pair Corralation between McKesson and Procter Gamble
Assuming the 90 days trading horizon McKesson is expected to generate 2.05 times more return on investment than Procter Gamble. However, McKesson is 2.05 times more volatile than Procter Gamble DRC. It trades about 0.16 of its potential returns per unit of risk. Procter Gamble DRC is currently generating about 0.01 per unit of risk. If you would invest 1,010,057 in McKesson on September 23, 2024 and sell it today you would earn a total of 189,511 from holding McKesson or generate 18.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 97.62% |
Values | Daily Returns |
McKesson vs. Procter Gamble DRC
Performance |
Timeline |
McKesson |
Procter Gamble DRC |
McKesson and Procter Gamble Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with McKesson and Procter Gamble
The main advantage of trading using opposite McKesson and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.McKesson vs. The Boeing | McKesson vs. Procter Gamble DRC | McKesson vs. The Goodyear Tire | McKesson vs. Honeywell International |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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