Correlation Between McDonalds and AB International
Can any of the company-specific risk be diversified away by investing in both McDonalds and AB International 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 McDonalds and AB International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and AB International Group, you can compare the effects of market volatilities on McDonalds and AB International 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 McDonalds with a short position of AB International. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and AB International.
Diversification Opportunities for McDonalds and AB International
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between McDonalds and ABQQ is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and AB International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB International and McDonalds 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 McDonalds are associated (or correlated) with AB International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB International has no effect on the direction of McDonalds i.e., McDonalds and AB International go up and down completely randomly.
Pair Corralation between McDonalds and AB International
Considering the 90-day investment horizon McDonalds is expected to under-perform the AB International. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds is 27.88 times less risky than AB International. The stock trades about -0.11 of its potential returns per unit of risk. The AB International Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 0.05 in AB International Group on August 27, 2024 and sell it today you would earn a total of 0.02 from holding AB International Group or generate 40.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. AB International Group
Performance |
| Timeline |
| McDonalds |
| AB International |
McDonalds and AB International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and AB International
The main advantage of trading using opposite McDonalds and AB International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, AB International 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 AB International will offset losses from the drop in AB International's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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