Correlation Between McDonalds and American Picture
Can any of the company-specific risk be diversified away by investing in both McDonalds and American Picture 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 American Picture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and American Picture House, you can compare the effects of market volatilities on McDonalds and American Picture 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 American Picture. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and American Picture.
Diversification Opportunities for McDonalds and American Picture
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between McDonalds and American is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and American Picture House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Picture House 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 American Picture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Picture House has no effect on the direction of McDonalds i.e., McDonalds and American Picture go up and down completely randomly.
Pair Corralation between McDonalds and American Picture
Considering the 90-day investment horizon McDonalds is expected to generate 37.81 times less return on investment than American Picture. But when comparing it to its historical volatility, McDonalds is 13.7 times less risky than American Picture. It trades about 0.03 of its potential returns per unit of risk. American Picture House is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8.00 in American Picture House on September 3, 2024 and sell it today you would earn a total of 17.00 from holding American Picture House or generate 212.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. American Picture House
Performance |
| Timeline |
| McDonalds |
| American Picture House |
McDonalds and American Picture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and American Picture
The main advantage of trading using opposite McDonalds and American Picture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, American Picture 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 American Picture will offset losses from the drop in American Picture's long position.| McDonalds vs. Highway Holdings Limited | McDonalds vs. QCR Holdings | McDonalds vs. Partner Communications | McDonalds vs. Acumen Pharmaceuticals |
| American Picture vs. Jackson Financial | American Picture vs. MetLife | American Picture vs. McDonalds | American Picture vs. Alcoa Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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