Correlation Between Krispy Kreme and McDonalds
Can any of the company-specific risk be diversified away by investing in both Krispy Kreme 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 Krispy Kreme and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Krispy Kreme and McDonalds, you can compare the effects of market volatilities on Krispy Kreme 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 Krispy Kreme with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krispy Kreme and McDonalds.
Diversification Opportunities for Krispy Kreme and McDonalds
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Krispy and McDonalds is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Krispy Kreme and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Krispy Kreme 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 Krispy Kreme 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 Krispy Kreme i.e., Krispy Kreme and McDonalds go up and down completely randomly.
Pair Corralation between Krispy Kreme and McDonalds
Given the investment horizon of 90 days Krispy Kreme is expected to under-perform the McDonalds. In addition to that, Krispy Kreme is 2.23 times more volatile than McDonalds. It trades about -0.08 of its total potential returns per unit of risk. McDonalds is currently generating about 0.01 per unit of volatility. If you would invest 29,500 in McDonalds on August 30, 2024 and sell it today you would earn a total of 8.00 from holding McDonalds or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Krispy Kreme vs. McDonalds
Performance |
| Timeline |
| Krispy Kreme |
| McDonalds |
Krispy Kreme and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Krispy Kreme and McDonalds
The main advantage of trading using opposite Krispy Kreme and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Krispy Kreme 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.| Krispy Kreme vs. Sendas Distribuidora SA | Krispy Kreme vs. Natural Grocers by | Krispy Kreme vs. Sprouts Farmers Market | Krispy Kreme vs. Albertsons Companies |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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