Correlation Between Southern Copper and McKesson

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

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

Diversification Opportunities for Southern Copper and McKesson

-0.79

Correlation Coefficient

Southern Copper  McKesson

Pay attention - limited upside

The 3 months correlation between Southern and McKesson is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Southern Copper and McKesson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McKesson and Southern Copper 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 Southern Copper 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 Southern Copper i.e., Southern Copper and McKesson go up and down completely randomly.

Pair Corralation between Southern Copper and McKesson

Assuming the 90 days trading horizon Southern Copper is expected to under-perform the McKesson. In addition to that, Southern Copper is 66.78 times more volatile than McKesson. It trades about -0.16 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 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	Weak
Accuracy	100.0%
Values	Daily Returns

Southern Copper  vs.  McKesson

Southern Copper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Southern Copper and McKesson

The main advantage of trading using opposite Southern Copper and McKesson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Copper 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 Southern Copper 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.