Correlation Between McDonalds and Pimco California
Can any of the company-specific risk be diversified away by investing in both McDonalds and Pimco California 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 Pimco California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Pimco California Municipal, you can compare the effects of market volatilities on McDonalds and Pimco California 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 Pimco California. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Pimco California.
Diversification Opportunities for McDonalds and Pimco California
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and Pimco is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Pimco California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco California Mun 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 Pimco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco California Mun has no effect on the direction of McDonalds i.e., McDonalds and Pimco California go up and down completely randomly.
Pair Corralation between McDonalds and Pimco California
Considering the 90-day investment horizon McDonalds is expected to generate 1.42 times more return on investment than Pimco California. However, McDonalds is 1.42 times more volatile than Pimco California Municipal. It trades about 0.02 of its potential returns per unit of risk. Pimco California Municipal is currently generating about 0.03 per unit of risk. If you would invest 27,752 in McDonalds on August 31, 2024 and sell it today you would earn a total of 1,849 from holding McDonalds or generate 6.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Pimco California Municipal
Performance |
| Timeline |
| McDonalds |
| Pimco California Mun |
McDonalds and Pimco California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Pimco California
The main advantage of trading using opposite McDonalds and Pimco California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Pimco California 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 Pimco California will offset losses from the drop in Pimco California's long position.| McDonalds vs. RLJ Lodging Trust | McDonalds vs. Aquagold International | McDonalds vs. Stepstone Group | McDonalds vs. Morningstar Unconstrained Allocation |
| Pimco California vs. MFS Investment Grade | Pimco California vs. Eaton Vance Municipal | Pimco California vs. DTF Tax Free | Pimco California vs. HUMANA INC |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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