Correlation Between McDonalds and EchoStar
Can any of the company-specific risk be diversified away by investing in both McDonalds and EchoStar 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 EchoStar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and EchoStar, you can compare the effects of market volatilities on McDonalds and EchoStar 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 EchoStar. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and EchoStar.
Diversification Opportunities for McDonalds and EchoStar
Very weak diversification
The 3 months correlation between McDonalds and EchoStar is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar 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 EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of McDonalds i.e., McDonalds and EchoStar go up and down completely randomly.
Pair Corralation between McDonalds and EchoStar
Considering the 90-day investment horizon McDonalds is expected to generate 5.09 times less return on investment than EchoStar. But when comparing it to its historical volatility, McDonalds is 4.09 times less risky than EchoStar. It trades about 0.03 of its potential returns per unit of risk. EchoStar is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,661 in EchoStar on August 28, 2024 and sell it today you would earn a total of 826.00 from holding EchoStar or generate 49.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. EchoStar
Performance |
| Timeline |
| McDonalds |
| EchoStar |
McDonalds and EchoStar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and EchoStar
The main advantage of trading using opposite McDonalds and EchoStar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, EchoStar 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 EchoStar will offset losses from the drop in EchoStar's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| EchoStar vs. ADTRAN Inc | EchoStar vs. Mynaric AG ADR | EchoStar vs. KVH Industries | EchoStar vs. Telesat 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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