Correlation Between McKesson and Schlumberger

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Can any of the company-specific risk be diversified away by investing in both McKesson and Schlumberger 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 Schlumberger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McKesson and Schlumberger Limited, you can compare the effects of market volatilities on McKesson and Schlumberger 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 Schlumberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Schlumberger.

Diversification Opportunities for McKesson and Schlumberger

McKessonSchlumbergerDiversified AwayMcKessonSchlumbergerDiversified Away100%
-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between McKesson and Schlumberger is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Schlumberger Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schlumberger Limited 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 Schlumberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schlumberger Limited has no effect on the direction of McKesson i.e., McKesson and Schlumberger go up and down completely randomly.

Pair Corralation between McKesson and Schlumberger

Assuming the 90 days trading horizon McKesson is expected to generate 1.1 times more return on investment than Schlumberger. However, McKesson is 1.1 times more volatile than Schlumberger Limited. It trades about 0.17 of its potential returns per unit of risk. Schlumberger Limited is currently generating about -0.04 per unit of risk. If you would invest  947,599  in McKesson on October 14, 2024 and sell it today you would earn a total of  251,969  from holding McKesson or generate 26.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.39%
ValuesDaily Returns

McKesson  vs.  Schlumberger Limited

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -1001020
JavaScript chart by amCharts 3.21.15MCK SLBN
       Timeline  
McKesson 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in McKesson are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, McKesson showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan9,50010,00010,50011,00011,50012,000
Schlumberger Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Schlumberger Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Schlumberger is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan750800850900

McKesson and Schlumberger Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.07-5.3-3.52-1.750.01.863.795.727.659.57 0.010.020.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.15MCK SLBN
       Returns  

Pair Trading with McKesson and Schlumberger

The main advantage of trading using opposite McKesson and Schlumberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Schlumberger 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 Schlumberger will offset losses from the drop in Schlumberger's long position.
The idea behind McKesson and Schlumberger Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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