Correlation Between Mckesson Corp and Chevron Corp

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

Diversification Opportunities for Mckesson Corp and Chevron Corp

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Mckesson and Chevron is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Mckesson Corp and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Mckesson Corp 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 Corp are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Mckesson Corp i.e., Mckesson Corp and Chevron Corp go up and down completely randomly.

Pair Corralation between Mckesson Corp and Chevron Corp

Considering the 90-day investment horizon Mckesson Corp is expected to generate 1.03 times less return on investment than Chevron Corp. But when comparing it to its historical volatility, Mckesson Corp is 1.32 times less risky than Chevron Corp. It trades about 0.12 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,760  in Chevron Corp on July 6, 2022 and sell it today you would earn a total of  8,413  from holding Chevron Corp or generate 124.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Mckesson Corp  vs.  Chevron Corp

 Performance (%) 
       Timeline  
Mckesson Corp 
Mckesson Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mckesson Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, Mckesson Corp may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Mckesson Price Channel

Chevron Corp 
Chevron Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Chevron Price Channel

Mckesson Corp and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mckesson Corp and Chevron Corp

The main advantage of trading using opposite Mckesson Corp and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mckesson Corp position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.
Mckesson Corp vs. Amazon Inc
The idea behind Mckesson Corp and Chevron Corp 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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