Correlation Between McDonalds and KraneShares California
Can any of the company-specific risk be diversified away by investing in both McDonalds and KraneShares California 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 KraneShares California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and KraneShares California Carbon, you can compare the effects of market volatilities on McDonalds and KraneShares California 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 KraneShares California. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and KraneShares California.
Diversification Opportunities for McDonalds and KraneShares California
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and KraneShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and KraneShares California Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares California 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 KraneShares California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares California has no effect on the direction of McDonalds i.e., McDonalds and KraneShares California go up and down completely randomly.
Pair Corralation between McDonalds and KraneShares California
Considering the 90-day investment horizon McDonalds is expected to generate 0.83 times more return on investment than KraneShares California. However, McDonalds is 1.21 times less risky than KraneShares California. It trades about 0.02 of its potential returns per unit of risk. KraneShares California Carbon is currently generating about 0.01 per unit of risk. If you would invest 28,022 in McDonalds on September 2, 2024 and sell it today you would earn a total of 1,579 from holding McDonalds or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. KraneShares California Carbon
Performance |
| Timeline |
| McDonalds |
| KraneShares California |
McDonalds and KraneShares California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and KraneShares California
The main advantage of trading using opposite McDonalds and KraneShares California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, KraneShares California 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 KraneShares California will offset losses from the drop in KraneShares California's long position.The idea behind McDonalds and KraneShares California Carbon pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| KraneShares California vs. KraneShares European Carbon | KraneShares California vs. iPath Series B | KraneShares California vs. KraneShares Global Carbon |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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