Correlation Between Dairy Farm and McDonalds
Can any of the company-specific risk be diversified away by investing in both Dairy Farm 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 Dairy Farm and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and McDonalds, you can compare the effects of market volatilities on Dairy Farm 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 Dairy Farm with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and McDonalds.
Diversification Opportunities for Dairy Farm and McDonalds
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dairy and McDonalds is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and McDonalds go up and down completely randomly.
Pair Corralation between Dairy Farm and McDonalds
Assuming the 90 days trading horizon Dairy Farm is expected to generate 2.91 times less return on investment than McDonalds. In addition to that, Dairy Farm is 2.5 times more volatile than McDonalds. It trades about 0.0 of its total potential returns per unit of risk. McDonalds is currently generating about 0.03 per unit of volatility. If you would invest 25,589 in McDonalds on September 12, 2024 and sell it today you would earn a total of 2,811 from holding McDonalds or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.72% |
| Values | Daily Returns |
Dairy Farm International vs. McDonalds
Performance |
| Timeline |
| Dairy Farm International |
| McDonalds |
Dairy Farm and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and McDonalds
The main advantage of trading using opposite Dairy Farm and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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.| Dairy Farm vs. Samsung Electronics Co | Dairy Farm vs. Methode Electronics | Dairy Farm vs. RYU Apparel | Dairy Farm vs. Aedas Homes SA |
| McDonalds vs. VIRGIN WINES UK | McDonalds vs. Titan Machinery | McDonalds vs. Dairy Farm International | McDonalds vs. Sumitomo Mitsui Construction |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Stocks Directory Find actively traded stocks across global markets | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |