Correlation Between McDonalds and SolarBank
Can any of the company-specific risk be diversified away by investing in both McDonalds and SolarBank 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 SolarBank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and SolarBank, you can compare the effects of market volatilities on McDonalds and SolarBank 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 SolarBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and SolarBank.
Diversification Opportunities for McDonalds and SolarBank
Very good diversification
The 3 months correlation between McDonalds and SolarBank is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and SolarBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarBank 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 SolarBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarBank has no effect on the direction of McDonalds i.e., McDonalds and SolarBank go up and down completely randomly.
Pair Corralation between McDonalds and SolarBank
If you would invest 26,118 in McDonalds on September 2, 2024 and sell it today you would earn a total of 3,483 from holding McDonalds or generate 13.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 0.79% |
| Values | Daily Returns |
McDonalds vs. SolarBank
Performance |
| Timeline |
| McDonalds |
| SolarBank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
McDonalds and SolarBank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and SolarBank
The main advantage of trading using opposite McDonalds and SolarBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, SolarBank 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 SolarBank will offset losses from the drop in SolarBank's long position.The idea behind McDonalds and SolarBank 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.| SolarBank vs. Oatly Group AB | SolarBank vs. Vita Coco | SolarBank vs. Warner Music Group | SolarBank vs. Constellation Brands Class |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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