Correlation Between McDonalds and Senti Biosciences
Can any of the company-specific risk be diversified away by investing in both McDonalds and Senti Biosciences 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 Senti Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Senti Biosciences, you can compare the effects of market volatilities on McDonalds and Senti Biosciences 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 Senti Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Senti Biosciences.
Diversification Opportunities for McDonalds and Senti Biosciences
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Senti is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Senti Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senti Biosciences 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 Senti Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senti Biosciences has no effect on the direction of McDonalds i.e., McDonalds and Senti Biosciences go up and down completely randomly.
Pair Corralation between McDonalds and Senti Biosciences
Considering the 90-day investment horizon McDonalds is expected to generate 0.14 times more return on investment than Senti Biosciences. However, McDonalds is 7.37 times less risky than Senti Biosciences. It trades about 0.03 of its potential returns per unit of risk. Senti Biosciences is currently generating about -0.03 per unit of risk. If you would invest 26,101 in McDonalds on August 27, 2024 and sell it today you would earn a total of 2,927 from holding McDonalds or generate 11.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Senti Biosciences
Performance |
| Timeline |
| McDonalds |
| Senti Biosciences |
McDonalds and Senti Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Senti Biosciences
The main advantage of trading using opposite McDonalds and Senti Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Senti Biosciences 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 Senti Biosciences will offset losses from the drop in Senti Biosciences' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| Senti Biosciences vs. Cadrenal Therapeutics, Common | Senti Biosciences vs. Foghorn Therapeutics | Senti Biosciences vs. Quoin Pharmaceuticals Ltd | Senti Biosciences vs. SAB Biotherapeutics |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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