Correlation Between Ethereum and McDonalds
Can any of the company-specific risk be diversified away by investing in both Ethereum 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 Ethereum and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethereum and McDonalds, you can compare the effects of market volatilities on Ethereum 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 Ethereum with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethereum and McDonalds.
Diversification Opportunities for Ethereum and McDonalds
Significant diversification
The 3 months correlation between Ethereum and McDonalds is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and McDonalds go up and down completely randomly.
Pair Corralation between Ethereum and McDonalds
Assuming the 90 days trading horizon Ethereum is expected to generate 7.0 times more return on investment than McDonalds. However, Ethereum is 7.0 times more volatile than McDonalds. It trades about 0.06 of its potential returns per unit of risk. McDonalds is currently generating about 0.03 per unit of risk. If you would invest 170,517 in Ethereum on November 1, 2024 and sell it today you would earn a total of 155,298 from holding Ethereum or generate 91.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 58.44% |
| Values | Daily Returns |
Ethereum vs. McDonalds
Performance |
| Timeline |
| Ethereum |
| McDonalds |
Ethereum and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethereum and McDonalds
The main advantage of trading using opposite Ethereum and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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.The idea behind Ethereum and McDonalds pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants | McDonalds vs. Yum China Holdings |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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