Correlation Between McKesson and Fibra Terrafina

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

By analyzing existing cross correlation between McKesson and Fibra Terrafina, you can compare the effects of market volatilities on McKesson and Fibra Terrafina 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 Fibra Terrafina. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Fibra Terrafina.

Diversification Opportunities for McKesson and Fibra Terrafina

-0.1

Correlation Coefficient

McKesson  Fibra Terrafina

Good diversification

The 3 months correlation between McKesson and Fibra is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Fibra Terrafina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Terrafina 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 Fibra Terrafina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Terrafina has no effect on the direction of McKesson i.e., McKesson and Fibra Terrafina go up and down completely randomly.

Pair Corralation between McKesson and Fibra Terrafina

Assuming the 90 days trading horizon McKesson is expected to generate 0.01 times more return on investment than Fibra Terrafina. However, McKesson is 153.39 times less risky than Fibra Terrafina. It trades about 0.13 of its potential returns per unit of risk. Fibra Terrafina is currently generating about -0.01 per unit of risk. If you would invest  1,198,119  in McKesson on December 23, 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	98.39%
Values	Daily Returns

McKesson  vs.  Fibra Terrafina

McKesson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McKesson are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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.

Fibra Terrafina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fibra Terrafina has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fibra Terrafina is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with McKesson and Fibra Terrafina

The main advantage of trading using opposite McKesson and Fibra Terrafina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Fibra Terrafina 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 Fibra Terrafina will offset losses from the drop in Fibra Terrafina's long position.

The idea behind McKesson and Fibra Terrafina 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.