Correlation Between Arcos Dorados and McDonalds
Can any of the company-specific risk be diversified away by investing in both Arcos Dorados 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 Arcos Dorados and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arcos Dorados Holdings and McDonalds, you can compare the effects of market volatilities on Arcos Dorados 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 Arcos Dorados with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcos Dorados and McDonalds.
Diversification Opportunities for Arcos Dorados and McDonalds
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Arcos and McDonalds is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Arcos Dorados Holdings and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Arcos Dorados 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 Arcos Dorados Holdings 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 Arcos Dorados i.e., Arcos Dorados and McDonalds go up and down completely randomly.
Pair Corralation between Arcos Dorados and McDonalds
Assuming the 90 days horizon Arcos Dorados Holdings is expected to generate 1.97 times more return on investment than McDonalds. However, Arcos Dorados is 1.97 times more volatile than McDonalds. It trades about 0.18 of its potential returns per unit of risk. McDonalds is currently generating about -0.1 per unit of risk. If you would invest 698.00 in Arcos Dorados Holdings on November 2, 2024 and sell it today you would earn a total of 52.00 from holding Arcos Dorados Holdings or generate 7.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Arcos Dorados Holdings vs. McDonalds
Performance |
| Timeline |
| Arcos Dorados Holdings |
| McDonalds |
Arcos Dorados and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arcos Dorados and McDonalds
The main advantage of trading using opposite Arcos Dorados and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcos Dorados 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.| Arcos Dorados vs. USWE SPORTS AB | Arcos Dorados vs. ETFS Coffee ETC | Arcos Dorados vs. Entravision Communications | Arcos Dorados vs. WillScot Mobile Mini |
| McDonalds vs. Perseus Mining Limited | McDonalds vs. Entravision Communications | McDonalds vs. Cairo Communication SpA | McDonalds vs. Ribbon Communications |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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