Correlation Between Dennys Corp and McDonalds Holdings
Can any of the company-specific risk be diversified away by investing in both Dennys Corp 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 Dennys Corp and McDonalds Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dennys Corp and McDonalds Holdings, you can compare the effects of market volatilities on Dennys Corp 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 Dennys Corp with a short position of McDonalds Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dennys Corp and McDonalds Holdings.
Diversification Opportunities for Dennys Corp and McDonalds Holdings
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dennys and McDonalds is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp and McDonalds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Holdings and Dennys Corp 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 Dennys Corp 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 Dennys Corp i.e., Dennys Corp and McDonalds Holdings go up and down completely randomly.
Pair Corralation between Dennys Corp and McDonalds Holdings
Given the investment horizon of 90 days Dennys Corp is expected to under-perform the McDonalds Holdings. In addition to that, Dennys Corp is 2.89 times more volatile than McDonalds Holdings. It trades about -0.02 of its total potential returns per unit of risk. McDonalds Holdings is currently generating about -0.03 per unit of volatility. If you would invest 4,150 in McDonalds Holdings on August 30, 2024 and sell it today you would lose (250.00) from holding McDonalds Holdings or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dennys Corp vs. McDonalds Holdings
Performance |
| Timeline |
| Dennys Corp |
| McDonalds Holdings |
Dennys Corp and McDonalds Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dennys Corp and McDonalds Holdings
The main advantage of trading using opposite Dennys Corp and McDonalds Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dennys Corp 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.| Dennys Corp vs. Chipotle Mexican Grill | Dennys Corp vs. Yum Brands | Dennys Corp vs. The Wendys Co | Dennys Corp vs. McDonalds |
| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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