Correlation Between McDonalds and City Developments
Can any of the company-specific risk be diversified away by investing in both McDonalds and City Developments 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 City Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and City Developments Limited, you can compare the effects of market volatilities on McDonalds and City Developments 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 City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and City Developments.
Diversification Opportunities for McDonalds and City Developments
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between McDonalds and City is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and City Developments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments 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 City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of McDonalds i.e., McDonalds and City Developments go up and down completely randomly.
Pair Corralation between McDonalds and City Developments
Considering the 90-day investment horizon McDonalds is expected to generate 0.52 times more return on investment than City Developments. However, McDonalds is 1.92 times less risky than City Developments. It trades about 0.03 of its potential returns per unit of risk. City Developments Limited is currently generating about -0.08 per unit of risk. If you would invest 26,342 in McDonalds on September 3, 2024 and sell it today you would earn a total of 3,259 from holding McDonalds or generate 12.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 49.09% |
| Values | Daily Returns |
McDonalds vs. City Developments Limited
Performance |
| Timeline |
| McDonalds |
| City Developments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
McDonalds and City Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and City Developments
The main advantage of trading using opposite McDonalds and City Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, City Developments 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 City Developments will offset losses from the drop in City Developments' long position.| McDonalds vs. Highway Holdings Limited | McDonalds vs. QCR Holdings | McDonalds vs. Partner Communications | McDonalds vs. Acumen Pharmaceuticals |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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