Correlation Between Compass Group and McDonalds
Can any of the company-specific risk be diversified away by investing in both Compass Group 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 Compass Group and McDonalds 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, you can compare the effects of market volatilities on Compass Group 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 Compass Group with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and McDonalds.
Diversification Opportunities for Compass Group and McDonalds
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Compass and McDonalds is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds 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. 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 Compass Group i.e., Compass Group and McDonalds go up and down completely randomly.
Pair Corralation between Compass Group and McDonalds
Assuming the 90 days horizon Compass Group PLC is expected to generate 0.96 times more return on investment than McDonalds. However, Compass Group PLC is 1.04 times less risky than McDonalds. It trades about 0.17 of its potential returns per unit of risk. McDonalds is currently generating about 0.01 per unit of risk. If you would invest 3,351 in Compass Group PLC on August 30, 2024 and sell it today you would earn a total of 121.00 from holding Compass Group PLC or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. McDonalds
Performance |
| Timeline |
| Compass Group PLC |
| McDonalds |
Compass Group and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and McDonalds
The main advantage of trading using opposite Compass Group and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group 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.| Compass Group vs. McDonalds | Compass Group vs. Starbucks | Compass Group vs. Chipotle Mexican Grill | Compass Group vs. Yum Brands |
| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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