Correlation Between BRIT AMER and McDonalds
Can any of the company-specific risk be diversified away by investing in both BRIT AMER 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 BRIT AMER and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and McDonalds, you can compare the effects of market volatilities on BRIT AMER 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 BRIT AMER with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and McDonalds.
Diversification Opportunities for BRIT AMER and McDonalds
Significant diversification
The 3 months correlation between BRIT and McDonalds is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and BRIT AMER 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 BRIT AMER TOBACCO 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 BRIT AMER i.e., BRIT AMER and McDonalds go up and down completely randomly.
Pair Corralation between BRIT AMER and McDonalds
Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 1.78 times more return on investment than McDonalds. However, BRIT AMER is 1.78 times more volatile than McDonalds. It trades about 0.26 of its potential returns per unit of risk. McDonalds is currently generating about 0.1 per unit of risk. If you would invest 3,316 in BRIT AMER TOBACCO on September 12, 2024 and sell it today you would earn a total of 265.00 from holding BRIT AMER TOBACCO or generate 7.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
BRIT AMER TOBACCO vs. McDonalds
Performance |
| Timeline |
| BRIT AMER TOBACCO |
| McDonalds |
BRIT AMER and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRIT AMER and McDonalds
The main advantage of trading using opposite BRIT AMER and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER 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.| BRIT AMER vs. PLAYMATES TOYS | BRIT AMER vs. TSOGO SUN GAMING | BRIT AMER vs. COFCO Joycome Foods | BRIT AMER vs. GigaMedia |
| McDonalds vs. VIRGIN WINES UK | McDonalds vs. Titan Machinery | McDonalds vs. Dairy Farm International | McDonalds vs. Sumitomo Mitsui Construction |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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