Correlation Between Titan Machinery and McDonalds
Can any of the company-specific risk be diversified away by investing in both Titan Machinery and McDonalds 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 Titan Machinery and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Titan Machinery and McDonalds, you can compare the effects of market volatilities on Titan Machinery and McDonalds 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 Titan Machinery with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Titan Machinery and McDonalds.
Diversification Opportunities for Titan Machinery and McDonalds
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Titan and McDonalds is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Titan Machinery 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 Titan Machinery are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Titan Machinery i.e., Titan Machinery and McDonalds go up and down completely randomly.
Pair Corralation between Titan Machinery and McDonalds
Assuming the 90 days horizon Titan Machinery is expected to generate 1.22 times less return on investment than McDonalds. In addition to that, Titan Machinery is 3.63 times more volatile than McDonalds. It trades about 0.02 of its total potential returns per unit of risk. McDonalds is currently generating about 0.11 per unit of volatility. If you would invest 28,063 in McDonalds on September 13, 2024 and sell it today you would earn a total of 522.00 from holding McDonalds or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Titan Machinery vs. McDonalds
Performance |
| Timeline |
| Titan Machinery |
| McDonalds |
Titan Machinery and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Titan Machinery and McDonalds
The main advantage of trading using opposite Titan Machinery and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Machinery position performs unexpectedly, McDonalds 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 McDonalds will offset losses from the drop in McDonalds' long position.| Titan Machinery vs. WATSCO INC B | Titan Machinery vs. Indutrade AB | Titan Machinery vs. Superior Plus Corp | Titan Machinery vs. SIVERS SEMICONDUCTORS AB |
| McDonalds vs. LANDSEA GREEN MANAGEMENT | McDonalds vs. Perdoceo Education | McDonalds vs. TFS FINANCIAL | McDonalds vs. Coor Service Management |
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 the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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