Correlation Between Compass Group and McDonalds Holdings
Can any of the company-specific risk be diversified away by investing in both Compass Group and McDonalds Holdings 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 Compass Group and McDonalds Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Group PLC and McDonalds Holdings, you can compare the effects of market volatilities on Compass Group and McDonalds Holdings 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 Compass Group with a short position of McDonalds Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and McDonalds Holdings.
Diversification Opportunities for Compass Group and McDonalds Holdings
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Compass and McDonalds is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and McDonalds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Holdings and Compass Group 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 Compass Group PLC are associated (or correlated) with McDonalds Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Holdings has no effect on the direction of Compass Group i.e., Compass Group and McDonalds Holdings go up and down completely randomly.
Pair Corralation between Compass Group and McDonalds Holdings
Assuming the 90 days horizon Compass Group PLC is expected to generate 0.97 times more return on investment than McDonalds Holdings. However, Compass Group PLC is 1.03 times less risky than McDonalds Holdings. It trades about 0.25 of its potential returns per unit of risk. McDonalds Holdings is currently generating about -0.21 per unit of risk. If you would invest 3,216 in Compass Group PLC on August 30, 2024 and sell it today you would earn a total of 219.00 from holding Compass Group PLC or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Compass Group PLC vs. McDonalds Holdings
Performance |
| Timeline |
| Compass Group PLC |
| McDonalds Holdings |
Compass Group and McDonalds Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and McDonalds Holdings
The main advantage of trading using opposite Compass Group and McDonalds Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, McDonalds Holdings 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 Holdings will offset losses from the drop in McDonalds Holdings' long position.| Compass Group vs. The Cheesecake Factory | Compass Group vs. Darden Restaurants | Compass Group vs. Wingstop | Compass Group vs. Dominos Pizza |
| McDonalds Holdings vs. McDonalds | McDonalds Holdings vs. Starbucks | McDonalds Holdings vs. Chipotle Mexican Grill | McDonalds Holdings vs. Yum Brands |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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