Correlation Between McDonalds and SSgA SPDR
Can any of the company-specific risk be diversified away by investing in both McDonalds and SSgA SPDR 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 SSgA SPDR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and SSgA SPDR ETFs, you can compare the effects of market volatilities on McDonalds and SSgA SPDR 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 SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and SSgA SPDR.
Diversification Opportunities for McDonalds and SSgA SPDR
Poor diversification
The 3 months correlation between McDonalds and SSgA is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of McDonalds i.e., McDonalds and SSgA SPDR go up and down completely randomly.
Pair Corralation between McDonalds and SSgA SPDR
Considering the 90-day investment horizon McDonalds is expected to generate 1.34 times less return on investment than SSgA SPDR. But when comparing it to its historical volatility, McDonalds is 1.37 times less risky than SSgA SPDR. It trades about 0.03 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,973 in SSgA SPDR ETFs on September 3, 2024 and sell it today you would earn a total of 986.00 from holding SSgA SPDR ETFs or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 92.73% |
| Values | Daily Returns |
McDonalds vs. SSgA SPDR ETFs
Performance |
| Timeline |
| McDonalds |
| SSgA SPDR ETFs |
McDonalds and SSgA SPDR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and SSgA SPDR
The main advantage of trading using opposite McDonalds and SSgA SPDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, SSgA SPDR 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 SSgA SPDR will offset losses from the drop in SSgA SPDR's long position.| McDonalds vs. Highway Holdings Limited | McDonalds vs. QCR Holdings | McDonalds vs. Partner Communications | McDonalds vs. Acumen Pharmaceuticals |
| SSgA SPDR vs. Vanguard Total Stock | SSgA SPDR vs. SPDR SP 500 | SSgA SPDR vs. Vanguard Total Bond | SSgA SPDR vs. Vanguard Value Index |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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