Correlation Between McDonalds and Karoon Energy
Can any of the company-specific risk be diversified away by investing in both McDonalds and Karoon Energy 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 Karoon Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Karoon Energy, you can compare the effects of market volatilities on McDonalds and Karoon Energy 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 Karoon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Karoon Energy.
Diversification Opportunities for McDonalds and Karoon Energy
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Karoon is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Karoon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karoon Energy 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 Karoon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karoon Energy has no effect on the direction of McDonalds i.e., McDonalds and Karoon Energy go up and down completely randomly.
Pair Corralation between McDonalds and Karoon Energy
Considering the 90-day investment horizon McDonalds is expected to generate 0.37 times more return on investment than Karoon Energy. However, McDonalds is 2.74 times less risky than Karoon Energy. It trades about 0.1 of its potential returns per unit of risk. Karoon Energy is currently generating about -0.02 per unit of risk. If you would invest 25,847 in McDonalds on September 3, 2024 and sell it today you would earn a total of 3,754 from holding McDonalds or generate 14.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.4% |
| Values | Daily Returns |
McDonalds vs. Karoon Energy
Performance |
| Timeline |
| McDonalds |
| Karoon Energy |
McDonalds and Karoon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Karoon Energy
The main advantage of trading using opposite McDonalds and Karoon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Karoon Energy 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 Karoon Energy will offset losses from the drop in Karoon Energy's long position.| McDonalds vs. Highway Holdings Limited | McDonalds vs. QCR Holdings | McDonalds vs. Partner Communications | McDonalds vs. Acumen Pharmaceuticals |
| Karoon Energy vs. CNX Resources Corp | Karoon Energy vs. MV Oil Trust | Karoon Energy vs. San Juan Basin | Karoon Energy vs. VOC Energy Trust |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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