Correlation Between Mckesson Corp and Etsy

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

Diversification Opportunities for Mckesson Corp and Etsy

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Mckesson and Etsy is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mckesson Corp and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Mckesson Corp i.e., Mckesson Corp and Etsy go up and down completely randomly.

Pair Corralation between Mckesson Corp and Etsy

Considering the 90-day investment horizon Mckesson Corp is expected to generate 2.75 times less return on investment than Etsy. But when comparing it to its historical volatility, Mckesson Corp is 2.42 times less risky than Etsy. It trades about 0.07 of its potential returns per unit of risk. Etsy Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,824  in Etsy Inc on July 2, 2022 and sell it today you would earn a total of  1,189  from holding Etsy Inc or generate 13.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Mckesson Corp  vs.  Etsy Inc

 Performance (%) 
       Timeline  
Mckesson Corp 
Mckesson Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mckesson Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Mckesson Corp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Mckesson Price Channel

Etsy Inc 
Etsy Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Etsy showed solid returns over the last few months and may actually be approaching a breakup point.

Etsy Price Channel

Mckesson Corp and Etsy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mckesson Corp and Etsy

The main advantage of trading using opposite Mckesson Corp and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mckesson Corp position performs unexpectedly, Etsy 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 Etsy will offset losses from the drop in Etsy's long position.
Mckesson Corp vs. Amazon Inc
The idea behind Mckesson Corp and Etsy Inc 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.
Etsy vs. Amazon Inc
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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