Correlation Between McDonalds and IShares Short
Can any of the company-specific risk be diversified away by investing in both McDonalds and IShares Short 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 Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and iShares Short Maturity, you can compare the effects of market volatilities on McDonalds and IShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and IShares Short.
Diversification Opportunities for McDonalds and IShares Short
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between McDonalds and IShares is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and iShares Short Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Maturity 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Maturity has no effect on the direction of McDonalds i.e., McDonalds and IShares Short go up and down completely randomly.
Pair Corralation between McDonalds and IShares Short
Considering the 90-day investment horizon McDonalds is expected to generate 10.25 times more return on investment than IShares Short. However, McDonalds is 10.25 times more volatile than iShares Short Maturity. It trades about 0.02 of its potential returns per unit of risk. iShares Short Maturity is currently generating about 0.2 per unit of risk. If you would invest 27,876 in McDonalds on September 3, 2024 and sell it today you would earn a total of 1,368 from holding McDonalds or generate 4.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. iShares Short Maturity
Performance |
| Timeline |
| McDonalds |
| iShares Short Maturity |
McDonalds and IShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and IShares Short
The main advantage of trading using opposite McDonalds and IShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, IShares Short 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 Short will offset losses from the drop in IShares Short's long position.| McDonalds vs. Highway Holdings Limited | McDonalds vs. QCR Holdings | McDonalds vs. Partner Communications | McDonalds vs. Acumen Pharmaceuticals |
| IShares Short vs. Invesco Ultra Short | IShares Short vs. iShares Ultra Short Term | IShares Short vs. PIMCO Enhanced Short | IShares Short vs. iShares Floating Rate |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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