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Kensho Stats

If Clinton wins, these stocks should rally, statistics show; CNN-owner Time Warner wins

Time Warner Inc. Time Warner Center CNN
Michael Nagle | Bloomberg | Getty Images

It has been much discussed by now that the purest way to track the state of the U.S. election in the financial markets is the change in the Mexican peso.

For example, after the FBI again cleared Democratic nominee Hillary Clinton of criminal wrongdoing over her email use, the U.S. dollar lost nearly 2 percent of its value versus the peso Monday. For many reasons, including a likely renegotiation of NAFTA by a Donald Trump administration, the peso's fate is firmly in the hands of the businessman's candidacy.

So now that the market has given us the definitive Trump barometer over the last few months in the peso let's see if we can take the analysis one step further on Election Day and find the stocks in the S&P 500 with the highest correlation to the currency. The goal is to find the stocks most highly correlated to either candidate.

Using hedge fund analytics tool Kensho, we looked at the correlation of all the stocks in the S&P 500 to the dollar-peso over the last three months. We looked at weekly correlation instead of daily in order to remove some of the noise.

The most interesting findings came from the "Pro-Clinton" list, the stocks with a negative correlation to the USD-MXN. Simply put, when the dollar falls in value versus the peso, indicating Clinton's chances rising and Trump's falling, these stocks historically went higher the last three months.


Source: CNBC Analysis using Kensho

(Don't get thrown by the negative correlation figures. Think of those as their correlation to Trump's odds.)

Time Warner will likely get a boost Wednesday if Clinton wins because investors perceive her administration as friendlier to the proposed AT&T takeover of the CNN owner, recent history shows. Other media stocks will likely benefit from her administration, thought to be friendlier to dealmaking in the media space in general.

Trump has made it clear he doesn't want to make media companies any bigger and has called out CNN repeatedly for bias on the campaign trail.

Whirlpool gains from a Clinton win and Trump loss because it is a big beneficiary of free trade and cheap labor.

And hospital operator HCA Holdings will benefit from Clinton keeping Obamacare alive.

When the dollar gained in value versus the peso, indicating Trump's chances increasing and Clinton's numbers falling, the stocks below historically went higher the last three months.



Source: CNBC Analysis using Kensho

No surprise that biotech and drug stocks dominate this list as a Trump victory is seen as somewhat friendlier on the drug pricing issue, which Clinton has made a centerpiece of her campaign.

So if you think, Clinton wins Tuesday, recent history shows you should buy Time Warner and short Celgene.

To be sure, as you'll notice on the tables, these correlation figures are not a perfect 1-to-1 and are relatively low in some cases so it's not a 100 percent certainty this trade works the day after the election. Just see the rally in biotech shares Monday for evidence that a Clinton win means guaranteed losses for biotech stocks Wednesday.

Sometimes this stuff is already priced into the stocks or subject to market phenomena like short covering in the short term.

But, these correlation figures likely tell us the general direction of trading over the next week and months after a Clinton or Trump win.

Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.