Correlation Between McDonalds and Kuraray
Can any of the company-specific risk be diversified away by investing in both McDonalds and Kuraray 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 Kuraray into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Kuraray Co, you can compare the effects of market volatilities on McDonalds and Kuraray 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 Kuraray. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Kuraray.
Diversification Opportunities for McDonalds and Kuraray
Very weak diversification
The 3 months correlation between McDonalds and Kuraray is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Kuraray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuraray 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 Kuraray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuraray has no effect on the direction of McDonalds i.e., McDonalds and Kuraray go up and down completely randomly.
Pair Corralation between McDonalds and Kuraray
Considering the 90-day investment horizon McDonalds is expected to generate 0.34 times more return on investment than Kuraray. However, McDonalds is 2.96 times less risky than Kuraray. It trades about 0.06 of its potential returns per unit of risk. Kuraray Co is currently generating about -0.18 per unit of risk. If you would invest 29,152 in McDonalds on August 31, 2024 and sell it today you would earn a total of 356.00 from holding McDonalds or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Kuraray Co
Performance |
| Timeline |
| McDonalds |
| Kuraray |
McDonalds and Kuraray Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Kuraray
The main advantage of trading using opposite McDonalds and Kuraray positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Kuraray 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 Kuraray will offset losses from the drop in Kuraray's long position.| McDonalds vs. RLJ Lodging Trust | McDonalds vs. Aquagold International | McDonalds vs. Stepstone Group | McDonalds vs. Morningstar Unconstrained Allocation |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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