Correlation Between McDonalds and Bridgetown Holdings
Can any of the company-specific risk be diversified away by investing in both McDonalds and Bridgetown Holdings 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 Bridgetown Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Bridgetown Holdings, you can compare the effects of market volatilities on McDonalds and Bridgetown Holdings 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 Bridgetown Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Bridgetown Holdings.
Diversification Opportunities for McDonalds and Bridgetown Holdings
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between McDonalds and Bridgetown is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Bridgetown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgetown Holdings 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 Bridgetown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgetown Holdings has no effect on the direction of McDonalds i.e., McDonalds and Bridgetown Holdings go up and down completely randomly.
Pair Corralation between McDonalds and Bridgetown Holdings
Considering the 90-day investment horizon McDonalds is expected to generate 8.17 times more return on investment than Bridgetown Holdings. However, McDonalds is 8.17 times more volatile than Bridgetown Holdings. It trades about 0.03 of its potential returns per unit of risk. Bridgetown Holdings is currently generating about 0.21 per unit of risk. If you would invest 25,225 in McDonalds on October 25, 2024 and sell it today you would earn a total of 3,218 from holding McDonalds or generate 12.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 23.89% |
| Values | Daily Returns |
McDonalds vs. Bridgetown Holdings
Performance |
| Timeline |
| McDonalds |
| Bridgetown Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
McDonalds and Bridgetown Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Bridgetown Holdings
The main advantage of trading using opposite McDonalds and Bridgetown Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Bridgetown Holdings 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 Bridgetown Holdings will offset losses from the drop in Bridgetown Holdings' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dominos Pizza Common | McDonalds vs. Yum Brands | McDonalds vs. The Wendys Co |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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