Correlation Between McDonalds and Japan Gold
Can any of the company-specific risk be diversified away by investing in both McDonalds and Japan Gold 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 Japan Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Japan Gold Corp, you can compare the effects of market volatilities on McDonalds and Japan Gold 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 Japan Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Japan Gold.
Diversification Opportunities for McDonalds and Japan Gold
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between McDonalds and Japan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Japan Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Gold Corp 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 Japan Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Gold Corp has no effect on the direction of McDonalds i.e., McDonalds and Japan Gold go up and down completely randomly.
Pair Corralation between McDonalds and Japan Gold
Considering the 90-day investment horizon McDonalds is expected to generate 4.76 times less return on investment than Japan Gold. But when comparing it to its historical volatility, McDonalds is 6.57 times less risky than Japan Gold. It trades about 0.05 of its potential returns per unit of risk. Japan Gold Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5.60 in Japan Gold Corp on September 1, 2024 and sell it today you would lose (0.20) from holding Japan Gold Corp or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Japan Gold Corp
Performance |
| Timeline |
| McDonalds |
| Japan Gold Corp |
McDonalds and Japan Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Japan Gold
The main advantage of trading using opposite McDonalds and Japan Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Japan Gold 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 Japan Gold will offset losses from the drop in Japan Gold's long position.| McDonalds vs. The Wendys Co | McDonalds vs. Shake Shack | McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants |
| Japan Gold vs. Aurion Resources | Japan Gold vs. Rio2 Limited | Japan Gold vs. Palamina Corp | Japan Gold vs. BTU Metals Corp |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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