Correlation Between McDonalds and Universal Power
Can any of the company-specific risk be diversified away by investing in both McDonalds and Universal Power 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 Universal Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Universal Power Industry, you can compare the effects of market volatilities on McDonalds and Universal Power 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 Universal Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Universal Power.
Diversification Opportunities for McDonalds and Universal Power
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Universal is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Universal Power Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Power Industry 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 Universal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Power Industry has no effect on the direction of McDonalds i.e., McDonalds and Universal Power go up and down completely randomly.
Pair Corralation between McDonalds and Universal Power
Considering the 90-day investment horizon McDonalds is expected to generate 0.83 times more return on investment than Universal Power. However, McDonalds is 1.21 times less risky than Universal Power. It trades about 0.07 of its potential returns per unit of risk. Universal Power Industry is currently generating about -0.21 per unit of risk. If you would invest 29,211 in McDonalds on September 1, 2024 and sell it today you would earn a total of 390.00 from holding McDonalds or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
McDonalds vs. Universal Power Industry
Performance |
| Timeline |
| McDonalds |
| Universal Power Industry |
McDonalds and Universal Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Universal Power
The main advantage of trading using opposite McDonalds and Universal Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Universal Power 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 Universal Power will offset losses from the drop in Universal Power's long position.| McDonalds vs. The Wendys Co | McDonalds vs. Shake Shack | McDonalds vs. Papa Johns International | McDonalds vs. Darden Restaurants |
| Universal Power vs. National Health Scan | Universal Power vs. Protect Pharmaceutical | Universal Power vs. World Oil Group | Universal Power vs. Steel Partners Holdings |
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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