Correlation Between McDonalds and Peloton Minerals
Can any of the company-specific risk be diversified away by investing in both McDonalds and Peloton Minerals 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 Peloton Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Peloton Minerals, you can compare the effects of market volatilities on McDonalds and Peloton Minerals 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 Peloton Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Peloton Minerals.
Diversification Opportunities for McDonalds and Peloton Minerals
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between McDonalds and Peloton is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Peloton Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Minerals 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 Peloton Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Minerals has no effect on the direction of McDonalds i.e., McDonalds and Peloton Minerals go up and down completely randomly.
Pair Corralation between McDonalds and Peloton Minerals
Considering the 90-day investment horizon McDonalds is expected to generate 11.92 times less return on investment than Peloton Minerals. But when comparing it to its historical volatility, McDonalds is 7.68 times less risky than Peloton Minerals. It trades about 0.02 of its potential returns per unit of risk. Peloton Minerals is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7.42 in Peloton Minerals on September 2, 2024 and sell it today you would lose (1.22) from holding Peloton Minerals or give up 16.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
McDonalds vs. Peloton Minerals
Performance |
| Timeline |
| McDonalds |
| Peloton Minerals |
McDonalds and Peloton Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Peloton Minerals
The main advantage of trading using opposite McDonalds and Peloton Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Peloton Minerals 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 Peloton Minerals will offset losses from the drop in Peloton Minerals' long position.The idea behind McDonalds and Peloton Minerals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Peloton Minerals vs. BTU Metals Corp | Peloton Minerals vs. Gold Springs Resource | Peloton Minerals vs. Norsemont Mining | Peloton Minerals vs. FireFox Gold Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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