Correlation Between McKesson and Idemitsu Kosan

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

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

Diversification Opportunities for McKesson and Idemitsu Kosan

0.23

Correlation Coefficient

McKesson  Idemitsu Kosan

Modest diversification

The 3 months correlation between McKesson and Idemitsu is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Idemitsu Kosan CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idemitsu Kosan CoLtd 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 Idemitsu Kosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idemitsu Kosan CoLtd has no effect on the direction of McKesson i.e., McKesson and Idemitsu Kosan go up and down completely randomly.

Pair Corralation between McKesson and Idemitsu Kosan

Considering the 90-day investment horizon McKesson is expected to generate 0.61 times more return on investment than Idemitsu Kosan. However, McKesson is 1.64 times less risky than Idemitsu Kosan. It trades about 0.2 of its potential returns per unit of risk. Idemitsu Kosan CoLtd is currently generating about 0.09 per unit of risk. If you would invest  57,910  in McKesson on December 20, 2024 and sell it today you would earn a total of  8,726  from holding McKesson or generate 15.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

McKesson  vs.  Idemitsu Kosan CoLtd

McKesson

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in McKesson are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent fundamental indicators, McKesson disclosed solid returns over the last few months and may actually be approaching a breakup point.

Idemitsu Kosan CoLtd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Idemitsu Kosan CoLtd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Idemitsu Kosan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with McKesson and Idemitsu Kosan

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

The idea behind McKesson and Idemitsu Kosan CoLtd 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.