Correlation Between Allegheny Technologies and McDonalds
Can any of the company-specific risk be diversified away by investing in both Allegheny Technologies 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 Allegheny Technologies and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allegheny Technologies Incorporated and McDonalds, you can compare the effects of market volatilities on Allegheny Technologies 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 Allegheny Technologies with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegheny Technologies and McDonalds.
Diversification Opportunities for Allegheny Technologies and McDonalds
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Allegheny and McDonalds is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Allegheny Technologies Incorpo and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Allegheny Technologies 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 Allegheny Technologies Incorporated 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 Allegheny Technologies i.e., Allegheny Technologies and McDonalds go up and down completely randomly.
Pair Corralation between Allegheny Technologies and McDonalds
Assuming the 90 days trading horizon Allegheny Technologies Incorporated is expected to generate 1.86 times more return on investment than McDonalds. However, Allegheny Technologies is 1.86 times more volatile than McDonalds. It trades about 0.0 of its potential returns per unit of risk. McDonalds is currently generating about -0.07 per unit of risk. If you would invest 5,674 in Allegheny Technologies Incorporated on October 26, 2024 and sell it today you would lose (24.00) from holding Allegheny Technologies Incorporated or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Allegheny Technologies Incorpo vs. McDonalds
Performance |
| Timeline |
| Allegheny Technologies |
| McDonalds |
Allegheny Technologies and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allegheny Technologies and McDonalds
The main advantage of trading using opposite Allegheny Technologies and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allegheny Technologies 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.| Allegheny Technologies vs. FORMPIPE SOFTWARE AB | Allegheny Technologies vs. Constellation Software | Allegheny Technologies vs. Beta Systems Software | Allegheny Technologies vs. CyberArk Software |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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