Correlation Between Canadian Utilities and McDonalds Corp
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and McDonalds Corp 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 Canadian Utilities and McDonalds Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and McDonalds Corp CDR, you can compare the effects of market volatilities on Canadian Utilities and McDonalds Corp 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 Canadian Utilities with a short position of McDonalds Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and McDonalds Corp.
Diversification Opportunities for Canadian Utilities and McDonalds Corp
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Canadian and McDonalds is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and McDonalds Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp CDR and Canadian Utilities 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 Canadian Utilities Limited are associated (or correlated) with McDonalds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Corp CDR has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and McDonalds Corp go up and down completely randomly.
Pair Corralation between Canadian Utilities and McDonalds Corp
Assuming the 90 days horizon Canadian Utilities is expected to generate 1.71 times less return on investment than McDonalds Corp. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.08 times less risky than McDonalds Corp. It trades about 0.02 of its potential returns per unit of risk. McDonalds Corp CDR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,280 in McDonalds Corp CDR on September 14, 2024 and sell it today you would earn a total of 318.00 from holding McDonalds Corp CDR or generate 13.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. McDonalds Corp CDR
Performance |
| Timeline |
| Canadian Utilities |
| McDonalds Corp CDR |
Canadian Utilities and McDonalds Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and McDonalds Corp
The main advantage of trading using opposite Canadian Utilities and McDonalds Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, McDonalds Corp 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 Corp will offset losses from the drop in McDonalds Corp's long position.| Canadian Utilities vs. Fortis Inc | Canadian Utilities vs. Emera Inc | Canadian Utilities vs. Algonquin Power Utilities | Canadian Utilities vs. ATCO |
| McDonalds Corp vs. Canadian Utilities Limited | McDonalds Corp vs. Cogeco Communications | McDonalds Corp vs. Canlan Ice Sports | McDonalds Corp vs. Champion Iron |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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