Correlation Between McDonalds and Inspire Global
Can any of the company-specific risk be diversified away by investing in both McDonalds and Inspire Global 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 Inspire Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Inspire Global Hope, you can compare the effects of market volatilities on McDonalds and Inspire Global 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 Inspire Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Inspire Global.
Diversification Opportunities for McDonalds and Inspire Global
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and Inspire is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Inspire Global Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire Global Hope 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 Inspire Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire Global Hope has no effect on the direction of McDonalds i.e., McDonalds and Inspire Global go up and down completely randomly.
Pair Corralation between McDonalds and Inspire Global
Considering the 90-day investment horizon McDonalds is expected to generate 1.33 times more return on investment than Inspire Global. However, McDonalds is 1.33 times more volatile than Inspire Global Hope. It trades about 0.1 of its potential returns per unit of risk. Inspire Global Hope is currently generating about 0.07 per unit of risk. If you would invest 25,823 in McDonalds on September 1, 2024 and sell it today you would earn a total of 3,778 from holding McDonalds or generate 14.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Inspire Global Hope
Performance |
| Timeline |
| McDonalds |
| Inspire Global Hope |
McDonalds and Inspire Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Inspire Global
The main advantage of trading using opposite McDonalds and Inspire Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Inspire Global 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 Inspire Global will offset losses from the drop in Inspire Global's long position.| McDonalds vs. The Wendys Co | McDonalds vs. Shake Shack | McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants |
| Inspire Global vs. Inspire SmallMid Cap | Inspire Global vs. Northern Lights | Inspire Global vs. Inspire International ESG | Inspire Global vs. Northern Lights |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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