Correlation Between Smart Share and McDonalds
Can any of the company-specific risk be diversified away by investing in both Smart Share 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 Smart Share and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smart Share Global and McDonalds, you can compare the effects of market volatilities on Smart Share 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 Smart Share with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Share and McDonalds.
Diversification Opportunities for Smart Share and McDonalds
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smart and McDonalds is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Smart Share 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 Smart Share Global 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 Smart Share i.e., Smart Share and McDonalds go up and down completely randomly.
Pair Corralation between Smart Share and McDonalds
Allowing for the 90-day total investment horizon Smart Share Global is expected to generate 2.54 times more return on investment than McDonalds. However, Smart Share is 2.54 times more volatile than McDonalds. It trades about 0.04 of its potential returns per unit of risk. McDonalds is currently generating about 0.06 per unit of risk. If you would invest 71.00 in Smart Share Global on September 4, 2024 and sell it today you would earn a total of 1.00 from holding Smart Share Global or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smart Share Global vs. McDonalds
Performance |
| Timeline |
| Smart Share Global |
| McDonalds |
Smart Share and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smart Share and McDonalds
The main advantage of trading using opposite Smart Share and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smart Share 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.| Smart Share vs. Frontdoor | Smart Share vs. Bright Horizons Family | Smart Share vs. Mister Car Wash | Smart Share vs. Carriage Services |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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