Correlation Between McDonalds and Boyd Gaming
Can any of the company-specific risk be diversified away by investing in both McDonalds and Boyd Gaming 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 Boyd Gaming into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Boyd Gaming, you can compare the effects of market volatilities on McDonalds and Boyd Gaming 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 Boyd Gaming. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Boyd Gaming.
Diversification Opportunities for McDonalds and Boyd Gaming
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between McDonalds and Boyd is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming 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 Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of McDonalds i.e., McDonalds and Boyd Gaming go up and down completely randomly.
Pair Corralation between McDonalds and Boyd Gaming
Considering the 90-day investment horizon McDonalds is expected to generate 2.15 times less return on investment than Boyd Gaming. But when comparing it to its historical volatility, McDonalds is 1.75 times less risky than Boyd Gaming. It trades about 0.03 of its potential returns per unit of risk. Boyd Gaming is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,767 in Boyd Gaming on August 29, 2024 and sell it today you would earn a total of 1,538 from holding Boyd Gaming or generate 26.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Boyd Gaming
Performance |
| Timeline |
| McDonalds |
| Boyd Gaming |
McDonalds and Boyd Gaming Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Boyd Gaming
The main advantage of trading using opposite McDonalds and Boyd Gaming positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Boyd Gaming 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 Boyd Gaming will offset losses from the drop in Boyd Gaming'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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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