Correlation Between McDonalds and Global X
Can any of the company-specific risk be diversified away by investing in both McDonalds and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Global X Funds, you can compare the effects of market volatilities on McDonalds and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Global X.
Diversification Opportunities for McDonalds and Global X
Poor diversification
The 3 months correlation between McDonalds and Global is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of McDonalds i.e., McDonalds and Global X go up and down completely randomly.
Pair Corralation between McDonalds and Global X
Considering the 90-day investment horizon McDonalds is expected to generate 1.36 times more return on investment than Global X. However, McDonalds is 1.36 times more volatile than Global X Funds. It trades about -0.06 of its potential returns per unit of risk. Global X Funds is currently generating about -0.11 per unit of risk. If you would invest 30,047 in McDonalds on August 26, 2024 and sell it today you would lose (1,019) from holding McDonalds or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Global X Funds
Performance |
| Timeline |
| McDonalds |
| Global X Funds |
McDonalds and Global X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Global X
The main advantage of trading using opposite McDonalds and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| Global X vs. Invesco PureBeta MSCI | Global X vs. Aquagold International | Global X vs. Morningstar Unconstrained Allocation | Global X vs. High Yield Municipal Fund |
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 CEOs Directory module to screen CEOs from public companies around the world.
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