Correlation Between McDonalds and Texas Roadhouse
Can any of the company-specific risk be diversified away by investing in both McDonalds and Texas Roadhouse 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 Texas Roadhouse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Texas Roadhouse, you can compare the effects of market volatilities on McDonalds and Texas Roadhouse 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 Texas Roadhouse. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Texas Roadhouse.
Diversification Opportunities for McDonalds and Texas Roadhouse
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between McDonalds and Texas is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse 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 Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of McDonalds i.e., McDonalds and Texas Roadhouse go up and down completely randomly.
Pair Corralation between McDonalds and Texas Roadhouse
Considering the 90-day investment horizon McDonalds is expected to generate 10.75 times less return on investment than Texas Roadhouse. But when comparing it to its historical volatility, McDonalds is 1.52 times less risky than Texas Roadhouse. It trades about 0.02 of its potential returns per unit of risk. Texas Roadhouse is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 16,718 in Texas Roadhouse on August 25, 2024 and sell it today you would earn a total of 2,772 from holding Texas Roadhouse or generate 16.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Texas Roadhouse
Performance |
| Timeline |
| McDonalds |
| Texas Roadhouse |
McDonalds and Texas Roadhouse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Texas Roadhouse
The main advantage of trading using opposite McDonalds and Texas Roadhouse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Texas Roadhouse 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 Texas Roadhouse will offset losses from the drop in Texas Roadhouse's long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| Texas Roadhouse vs. Yum Brands | Texas Roadhouse vs. McDonalds | Texas Roadhouse vs. Shake Shack | Texas Roadhouse vs. Papa Johns International |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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