Correlation Between McDonalds and Holley
Can any of the company-specific risk be diversified away by investing in both McDonalds and Holley 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 Holley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Holley Inc, you can compare the effects of market volatilities on McDonalds and Holley 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 Holley. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Holley.
Diversification Opportunities for McDonalds and Holley
Very good diversification
The 3 months correlation between McDonalds and Holley is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Holley Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holley Inc 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 Holley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holley Inc has no effect on the direction of McDonalds i.e., McDonalds and Holley go up and down completely randomly.
Pair Corralation between McDonalds and Holley
Considering the 90-day investment horizon McDonalds is expected to generate 3.08 times less return on investment than Holley. But when comparing it to its historical volatility, McDonalds is 4.18 times less risky than Holley. It trades about 0.04 of its potential returns per unit of risk. Holley Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 218.00 in Holley Inc on November 19, 2024 and sell it today you would earn a total of 66.00 from holding Holley Inc or generate 30.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Holley Inc
Performance |
| Timeline |
| McDonalds |
| Holley Inc |
McDonalds and Holley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Holley
The main advantage of trading using opposite McDonalds and Holley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Holley 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 Holley will offset losses from the drop in Holley's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza Common | McDonalds vs. Yum Brands |
| Holley vs. Dorman Products | Holley vs. Monro Muffler Brake | Holley vs. Standard Motor Products | Holley vs. Stoneridge |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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