Correlation Between McDonalds and IShares Utilities
Can any of the company-specific risk be diversified away by investing in both McDonalds and IShares Utilities 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 Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and iShares Utilities ETF, you can compare the effects of market volatilities on McDonalds and IShares Utilities 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 Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and IShares Utilities.
Diversification Opportunities for McDonalds and IShares Utilities
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and iShares Utilities ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Utilities ETF 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 Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Utilities ETF has no effect on the direction of McDonalds i.e., McDonalds and IShares Utilities go up and down completely randomly.
Pair Corralation between McDonalds and IShares Utilities
Considering the 90-day investment horizon McDonalds is expected to under-perform the IShares Utilities. In addition to that, McDonalds is 1.06 times more volatile than iShares Utilities ETF. It trades about -0.13 of its total potential returns per unit of risk. iShares Utilities ETF is currently generating about 0.02 per unit of volatility. If you would invest 10,378 in iShares Utilities ETF on August 24, 2024 and sell it today you would earn a total of 25.00 from holding iShares Utilities ETF or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. iShares Utilities ETF
Performance |
| Timeline |
| McDonalds |
| iShares Utilities ETF |
McDonalds and IShares Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and IShares Utilities
The main advantage of trading using opposite McDonalds and IShares Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, IShares Utilities 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 Utilities will offset losses from the drop in IShares Utilities' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| IShares Utilities vs. iShares Industrials ETF | IShares Utilities vs. iShares Consumer Discretionary | IShares Utilities vs. iShares Consumer Staples | IShares Utilities vs. iShares Telecommunications ETF |
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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