Correlation Between McDonalds and IShares Global
Can any of the company-specific risk be diversified away by investing in both McDonalds and IShares Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and iShares Global Utilities, you can compare the effects of market volatilities on McDonalds and IShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and IShares Global.
Diversification Opportunities for McDonalds and IShares Global
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and IShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and iShares Global Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Utilities 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Utilities has no effect on the direction of McDonalds i.e., McDonalds and IShares Global go up and down completely randomly.
Pair Corralation between McDonalds and IShares Global
Considering the 90-day investment horizon McDonalds is expected to under-perform the IShares Global. In addition to that, McDonalds is 1.17 times more volatile than iShares Global Utilities. It trades about -0.12 of its total potential returns per unit of risk. iShares Global Utilities is currently generating about -0.1 per unit of volatility. If you would invest 7,063 in iShares Global Utilities on August 24, 2024 and sell it today you would lose (159.00) from holding iShares Global Utilities or give up 2.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. iShares Global Utilities
Performance |
| Timeline |
| McDonalds |
| iShares Global Utilities |
McDonalds and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and IShares Global
The main advantage of trading using opposite McDonalds and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Eshallgo Class A | McDonalds vs. Amtech Systems | McDonalds vs. Gold Fields Ltd |
| IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Industrials | IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Materials |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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