Correlation Between McDonalds and River Financial
Can any of the company-specific risk be diversified away by investing in both McDonalds and River Financial 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 River Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and River Financial, you can compare the effects of market volatilities on McDonalds and River Financial 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 River Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and River Financial.
Diversification Opportunities for McDonalds and River Financial
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between McDonalds and River is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and River Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River Financial 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 River Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River Financial has no effect on the direction of McDonalds i.e., McDonalds and River Financial go up and down completely randomly.
Pair Corralation between McDonalds and River Financial
Considering the 90-day investment horizon McDonalds is expected to generate 1.28 times more return on investment than River Financial. However, McDonalds is 1.28 times more volatile than River Financial. It trades about 0.02 of its potential returns per unit of risk. River Financial is currently generating about 0.0 per unit of risk. If you would invest 28,022 in McDonalds on September 2, 2024 and sell it today you would earn a total of 1,579 from holding McDonalds or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 67.74% |
| Values | Daily Returns |
McDonalds vs. River Financial
Performance |
| Timeline |
| McDonalds |
| River Financial |
McDonalds and River Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and River Financial
The main advantage of trading using opposite McDonalds and River Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, River Financial 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 River Financial will offset losses from the drop in River Financial's long position.The idea behind McDonalds and River Financial 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.| River Financial vs. Piraeus Bank SA | River Financial vs. Turkiye Garanti Bankasi | River Financial vs. Uwharrie Capital 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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