Correlation Between McDonalds and IShares JPX
Can any of the company-specific risk be diversified away by investing in both McDonalds and IShares JPX 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 JPX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and iShares JPX Nikkei 400, you can compare the effects of market volatilities on McDonalds and IShares JPX 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 JPX. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and IShares JPX.
Diversification Opportunities for McDonalds and IShares JPX
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and IShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and iShares JPX Nikkei 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JPX Nikkei 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 JPX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JPX Nikkei has no effect on the direction of McDonalds i.e., McDonalds and IShares JPX go up and down completely randomly.
Pair Corralation between McDonalds and IShares JPX
Considering the 90-day investment horizon McDonalds is expected to under-perform the IShares JPX. In addition to that, McDonalds is 1.04 times more volatile than iShares JPX Nikkei 400. It trades about -0.06 of its total potential returns per unit of risk. iShares JPX Nikkei 400 is currently generating about 0.18 per unit of volatility. If you would invest 7,071 in iShares JPX Nikkei 400 on November 3, 2024 and sell it today you would earn a total of 224.00 from holding iShares JPX Nikkei 400 or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
McDonalds vs. iShares JPX Nikkei 400
Performance |
| Timeline |
| McDonalds |
| iShares JPX Nikkei |
McDonalds and IShares JPX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and IShares JPX
The main advantage of trading using opposite McDonalds and IShares JPX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, IShares JPX 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 JPX will offset losses from the drop in IShares JPX's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dominos Pizza Common | McDonalds vs. Yum Brands | McDonalds vs. The Wendys Co |
| IShares JPX vs. iShares MSCI Japan | IShares JPX vs. iShares Currency Hedged | IShares JPX vs. iShares MSCI United |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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