Correlation Between DiamondRock Hospitality and McDonalds
Can any of the company-specific risk be diversified away by investing in both DiamondRock Hospitality 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 DiamondRock Hospitality and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DiamondRock Hospitality and McDonalds, you can compare the effects of market volatilities on DiamondRock Hospitality 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 DiamondRock Hospitality with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of DiamondRock Hospitality and McDonalds.
Diversification Opportunities for DiamondRock Hospitality and McDonalds
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DiamondRock and McDonalds is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding DiamondRock Hospitality and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and DiamondRock Hospitality 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 DiamondRock Hospitality 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 DiamondRock Hospitality i.e., DiamondRock Hospitality and McDonalds go up and down completely randomly.
Pair Corralation between DiamondRock Hospitality and McDonalds
Assuming the 90 days horizon DiamondRock Hospitality is expected to generate 2.66 times more return on investment than McDonalds. However, DiamondRock Hospitality is 2.66 times more volatile than McDonalds. It trades about 0.29 of its potential returns per unit of risk. McDonalds is currently generating about 0.21 per unit of risk. If you would invest 740.00 in DiamondRock Hospitality on September 2, 2024 and sell it today you would earn a total of 125.00 from holding DiamondRock Hospitality or generate 16.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DiamondRock Hospitality vs. McDonalds
Performance |
| Timeline |
| DiamondRock Hospitality |
| McDonalds |
DiamondRock Hospitality and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DiamondRock Hospitality and McDonalds
The main advantage of trading using opposite DiamondRock Hospitality and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DiamondRock Hospitality 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.| DiamondRock Hospitality vs. Superior Plus Corp | DiamondRock Hospitality vs. NMI Holdings | DiamondRock Hospitality vs. Origin Agritech | DiamondRock Hospitality vs. SIVERS SEMICONDUCTORS AB |
| McDonalds vs. TAL Education Group | McDonalds vs. Xinhua Winshare Publishing | McDonalds vs. IDP EDUCATION LTD | McDonalds vs. Genco Shipping Trading |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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