Correlation Between Bitcoin and McDonalds
Can any of the company-specific risk be diversified away by investing in both Bitcoin 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 Bitcoin and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and McDonalds, you can compare the effects of market volatilities on Bitcoin 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 Bitcoin with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and McDonalds.
Diversification Opportunities for Bitcoin and McDonalds
Very good diversification
The 3 months correlation between Bitcoin and McDonalds is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Bitcoin 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 Bitcoin 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 Bitcoin i.e., Bitcoin and McDonalds go up and down completely randomly.
Pair Corralation between Bitcoin and McDonalds
Assuming the 90 days trading horizon Bitcoin is expected to generate 2.18 times more return on investment than McDonalds. However, Bitcoin is 2.18 times more volatile than McDonalds. It trades about 0.24 of its potential returns per unit of risk. McDonalds is currently generating about 0.01 per unit of risk. If you would invest 9,439,251 in Bitcoin on November 1, 2024 and sell it today you would earn a total of 1,046,249 from holding Bitcoin or generate 11.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Bitcoin vs. McDonalds
Performance |
| Timeline |
| Bitcoin |
| McDonalds |
Bitcoin and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin and McDonalds
The main advantage of trading using opposite Bitcoin and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin 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.The idea behind Bitcoin and McDonalds pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants | McDonalds vs. Yum China Holdings |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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