Correlation Between McDonalds and APPLE

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Can any of the company-specific risk be diversified away by investing in both McDonalds and APPLE 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 APPLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and APPLE INC 385, you can compare the effects of market volatilities on McDonalds and APPLE 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 APPLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and APPLE.

Diversification Opportunities for McDonalds and APPLE

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between McDonalds and APPLE is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and APPLE INC 385 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLE INC 385 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 APPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLE INC 385 has no effect on the direction of McDonalds i.e., McDonalds and APPLE go up and down completely randomly.

Pair Corralation between McDonalds and APPLE

Considering the 90-day investment horizon McDonalds is expected to generate 1.12 times more return on investment than APPLE. However, McDonalds is 1.12 times more volatile than APPLE INC 385. It trades about 0.06 of its potential returns per unit of risk. APPLE INC 385 is currently generating about -0.09 per unit of risk. If you would invest  28,552  in McDonalds on September 2, 2024 and sell it today you would earn a total of  1,049  from holding McDonalds or generate 3.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

McDonalds  vs.  APPLE INC 385

 Performance 
       Timeline  
McDonalds 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
APPLE INC 385 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days APPLE INC 385 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APPLE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

McDonalds and APPLE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds and APPLE

The main advantage of trading using opposite McDonalds and APPLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, APPLE 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 APPLE will offset losses from the drop in APPLE's long position.
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The idea behind McDonalds and APPLE INC 385 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.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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