Correlation Between McDonalds and Hyatt Hotels
Can any of the company-specific risk be diversified away by investing in both McDonalds and Hyatt Hotels 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 Hyatt Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Hyatt Hotels, you can compare the effects of market volatilities on McDonalds and Hyatt Hotels 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 Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Hyatt Hotels.
Diversification Opportunities for McDonalds and Hyatt Hotels
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between McDonalds and Hyatt is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels 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 Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of McDonalds i.e., McDonalds and Hyatt Hotels go up and down completely randomly.
Pair Corralation between McDonalds and Hyatt Hotels
Considering the 90-day investment horizon McDonalds is expected to generate 3.43 times less return on investment than Hyatt Hotels. But when comparing it to its historical volatility, McDonalds is 1.81 times less risky than Hyatt Hotels. It trades about 0.04 of its potential returns per unit of risk. Hyatt Hotels is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8,978 in Hyatt Hotels on September 12, 2024 and sell it today you would earn a total of 7,157 from holding Hyatt Hotels or generate 79.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Hyatt Hotels
Performance |
| Timeline |
| McDonalds |
| Hyatt Hotels |
McDonalds and Hyatt Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Hyatt Hotels
The main advantage of trading using opposite McDonalds and Hyatt Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Hyatt Hotels 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 Hyatt Hotels will offset losses from the drop in Hyatt Hotels' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| Hyatt Hotels vs. InterContinental Hotels Group | Hyatt Hotels vs. Hilton Worldwide Holdings | Hyatt Hotels vs. Marriott International | Hyatt Hotels vs. Choice Hotels International |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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