Correlation Between Nio and McKesson

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

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

Diversification Opportunities for Nio and McKesson

-0.65

Correlation Coefficient

Nio  McKesson

Excellent diversification

The 3 months correlation between Nio and McKesson is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nio Class A and McKesson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McKesson and Nio 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 Nio Class A 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 Nio i.e., Nio and McKesson go up and down completely randomly.

Pair Corralation between Nio and McKesson

Considering the 90-day investment horizon Nio Class A is expected to under-perform the McKesson. In addition to that, Nio is 3.38 times more volatile than McKesson. It trades about -0.05 of its total potential returns per unit of risk. McKesson is currently generating about 0.12 per unit of volatility. If you would invest  34,792  in McKesson on January 24, 2024 and sell it today you would earn a total of  17,940  from holding McKesson or generate 51.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nio Class A  vs.  McKesson

Nio Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nio Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

McKesson

Risk-Adjusted Performance

10 of 100

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. Despite quite inconsistent fundamental indicators, McKesson may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Nio and McKesson

The main advantage of trading using opposite Nio and McKesson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nio 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 Nio Class A 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 Commodity Directory module to find actively traded commodities issued by global exchanges.