Correlation Between McDonalds and Soho House
Can any of the company-specific risk be diversified away by investing in both McDonalds and Soho House 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 Soho House into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Soho House Co, you can compare the effects of market volatilities on McDonalds and Soho House 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 Soho House. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Soho House.
Diversification Opportunities for McDonalds and Soho House
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Soho is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House 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 Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of McDonalds i.e., McDonalds and Soho House go up and down completely randomly.
Pair Corralation between McDonalds and Soho House
Considering the 90-day investment horizon McDonalds is expected to generate 3.7 times less return on investment than Soho House. But when comparing it to its historical volatility, McDonalds is 4.28 times less risky than Soho House. It trades about 0.03 of its potential returns per unit of risk. Soho House Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 434.00 in Soho House Co on August 28, 2024 and sell it today you would earn a total of 67.00 from holding Soho House Co or generate 15.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Soho House Co
Performance |
| Timeline |
| McDonalds |
| Soho House |
McDonalds and Soho House Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Soho House
The main advantage of trading using opposite McDonalds and Soho House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Soho House 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 Soho House will offset losses from the drop in Soho House's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| Soho House vs. CenterPoint Energy | Soho House vs. Southwest Gas Holdings | Soho House vs. Willamette Valley Vineyards | Soho House vs. Scandinavian Tobacco Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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