Correlation Between Columbia Sportswear and McDonalds
Can any of the company-specific risk be diversified away by investing in both Columbia Sportswear 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 Columbia Sportswear and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Sportswear and McDonalds, you can compare the effects of market volatilities on Columbia Sportswear 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 Columbia Sportswear with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Sportswear and McDonalds.
Diversification Opportunities for Columbia Sportswear and McDonalds
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Columbia and McDonalds is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear i.e., Columbia Sportswear and McDonalds go up and down completely randomly.
Pair Corralation between Columbia Sportswear and McDonalds
Assuming the 90 days horizon Columbia Sportswear is expected to generate 1.57 times more return on investment than McDonalds. However, Columbia Sportswear is 1.57 times more volatile than McDonalds. It trades about 0.16 of its potential returns per unit of risk. McDonalds is currently generating about 0.07 per unit of risk. If you would invest 7,322 in Columbia Sportswear on August 29, 2024 and sell it today you would earn a total of 1,028 from holding Columbia Sportswear or generate 14.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Columbia Sportswear vs. McDonalds
Performance |
| Timeline |
| Columbia Sportswear |
| McDonalds |
Columbia Sportswear and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Sportswear and McDonalds
The main advantage of trading using opposite Columbia Sportswear and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Sportswear 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.| Columbia Sportswear vs. Lion One Metals | Columbia Sportswear vs. Addus HomeCare | Columbia Sportswear vs. American Homes 4 | Columbia Sportswear vs. ANGI Homeservices |
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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 Stocks Directory module to find actively traded stocks across global markets.
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