Correlation Between McDonalds and Roundhill GLP
Can any of the company-specific risk be diversified away by investing in both McDonalds and Roundhill GLP 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 Roundhill GLP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Roundhill GLP 1 Weight, you can compare the effects of market volatilities on McDonalds and Roundhill GLP 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 Roundhill GLP. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Roundhill GLP.
Diversification Opportunities for McDonalds and Roundhill GLP
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and Roundhill is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Roundhill GLP 1 Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill GLP 1 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 Roundhill GLP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill GLP 1 has no effect on the direction of McDonalds i.e., McDonalds and Roundhill GLP go up and down completely randomly.
Pair Corralation between McDonalds and Roundhill GLP
Considering the 90-day investment horizon McDonalds is expected to generate 0.7 times more return on investment than Roundhill GLP. However, McDonalds is 1.43 times less risky than Roundhill GLP. It trades about 0.03 of its potential returns per unit of risk. Roundhill GLP 1 Weight is currently generating about 0.0 per unit of risk. If you would invest 25,260 in McDonalds on November 1, 2024 and sell it today you would earn a total of 3,772 from holding McDonalds or generate 14.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 36.71% |
| Values | Daily Returns |
McDonalds vs. Roundhill GLP 1 Weight
Performance |
| Timeline |
| McDonalds |
| Roundhill GLP 1 |
McDonalds and Roundhill GLP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Roundhill GLP
The main advantage of trading using opposite McDonalds and Roundhill GLP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Roundhill GLP 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 Roundhill GLP will offset losses from the drop in Roundhill GLP's long position.| McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants | McDonalds vs. Yum China Holdings |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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