Correlation Between McDonalds and Nasdaq
Can any of the company-specific risk be diversified away by investing in both McDonalds and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Nasdaq Inc, you can compare the effects of market volatilities on McDonalds and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Nasdaq.
Diversification Opportunities for McDonalds and Nasdaq
Good diversification
The 3 months correlation between McDonalds and Nasdaq is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of McDonalds i.e., McDonalds and Nasdaq go up and down completely randomly.
Pair Corralation between McDonalds and Nasdaq
Considering the 90-day investment horizon McDonalds is expected to generate 3.86 times less return on investment than Nasdaq. But when comparing it to its historical volatility, McDonalds is 1.06 times less risky than Nasdaq. It trades about 0.05 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,997 in Nasdaq Inc on September 1, 2024 and sell it today you would earn a total of 3,302 from holding Nasdaq Inc or generate 66.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Nasdaq Inc
Performance |
| Timeline |
| McDonalds |
| Nasdaq Inc |
McDonalds and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Nasdaq
The main advantage of trading using opposite McDonalds and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.| McDonalds vs. The Wendys Co | McDonalds vs. Shake Shack | McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |