Correlation Between McDonalds and IShares Currency
Can any of the company-specific risk be diversified away by investing in both McDonalds and IShares Currency 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 IShares Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and iShares Currency Hedged, you can compare the effects of market volatilities on McDonalds and IShares Currency 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 IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and IShares Currency.
Diversification Opportunities for McDonalds and IShares Currency
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of McDonalds i.e., McDonalds and IShares Currency go up and down completely randomly.
Pair Corralation between McDonalds and IShares Currency
Considering the 90-day investment horizon McDonalds is expected to generate 1.18 times more return on investment than IShares Currency. However, McDonalds is 1.18 times more volatile than iShares Currency Hedged. It trades about 0.07 of its potential returns per unit of risk. iShares Currency Hedged is currently generating about -0.08 per unit of risk. 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 Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
McDonalds vs. iShares Currency Hedged
Performance |
| Timeline |
| McDonalds |
| iShares Currency Hedged |
McDonalds and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and IShares Currency
The main advantage of trading using opposite McDonalds and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, IShares Currency 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 IShares Currency will offset losses from the drop in IShares Currency's long position.| McDonalds vs. The Wendys Co | McDonalds vs. Shake Shack | McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants |
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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