Correlation Between McDonalds and United States
Can any of the company-specific risk be diversified away by investing in both McDonalds and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and United States Copper, you can compare the effects of market volatilities on McDonalds and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and United States.
Diversification Opportunities for McDonalds and United States
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and United States Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Copper 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Copper has no effect on the direction of McDonalds i.e., McDonalds and United States go up and down completely randomly.
Pair Corralation between McDonalds and United States
Considering the 90-day investment horizon McDonalds is expected to generate 0.77 times more return on investment than United States. However, McDonalds is 1.3 times less risky than United States. It trades about 0.03 of its potential returns per unit of risk. United States Copper is currently generating about 0.02 per unit of risk. If you would invest 26,257 in McDonalds on August 29, 2024 and sell it today you would earn a total of 3,376 from holding McDonalds or generate 12.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. United States Copper
Performance |
| Timeline |
| McDonalds |
| United States Copper |
McDonalds and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and United States
The main advantage of trading using opposite McDonalds and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| United States vs. Aquagold International | United States vs. Morningstar Unconstrained Allocation | United States vs. High Yield Municipal Fund | United States vs. Thrivent High Yield |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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