Correlation Between McDonalds and Digital Media
Can any of the company-specific risk be diversified away by investing in both McDonalds and Digital Media 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 Digital Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Digital Media Solutions, you can compare the effects of market volatilities on McDonalds and Digital Media 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 Digital Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Digital Media.
Diversification Opportunities for McDonalds and Digital Media
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Digital is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Digital Media Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Media Solutions 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 Digital Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Media Solutions has no effect on the direction of McDonalds i.e., McDonalds and Digital Media go up and down completely randomly.
Pair Corralation between McDonalds and Digital Media
If you would invest 29,211 in McDonalds on September 1, 2024 and sell it today you would earn a total of 390.00 from holding McDonalds or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
McDonalds vs. Digital Media Solutions
Performance |
| Timeline |
| McDonalds |
| Digital Media Solutions |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
McDonalds and Digital Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Digital Media
The main advantage of trading using opposite McDonalds and Digital Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Digital Media 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 Digital Media will offset losses from the drop in Digital Media's long position.| McDonalds vs. The Wendys Co | McDonalds vs. Shake Shack | McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants |
| Digital Media vs. Advantage Solutions | Digital Media vs. Townsquare Media | Digital Media vs. Entravision Communications | Digital Media vs. Emerald Expositions Events |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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