Correlation Between McDonalds and 49446RAY5

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Can any of the company-specific risk be diversified away by investing in both McDonalds and 49446RAY5 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 49446RAY5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and KIM 225 01 DEC 31, you can compare the effects of market volatilities on McDonalds and 49446RAY5 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 49446RAY5. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and 49446RAY5.

Diversification Opportunities for McDonalds and 49446RAY5

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between McDonalds and 49446RAY5 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and KIM 225 01 DEC 31 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIM 225 01 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 49446RAY5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIM 225 01 has no effect on the direction of McDonalds i.e., McDonalds and 49446RAY5 go up and down completely randomly.

Pair Corralation between McDonalds and 49446RAY5

Considering the 90-day investment horizon McDonalds is expected to generate 1.16 times more return on investment than 49446RAY5. However, McDonalds is 1.16 times more volatile than KIM 225 01 DEC 31. It trades about 0.03 of its potential returns per unit of risk. KIM 225 01 DEC 31 is currently generating about 0.01 per unit of risk. If you would invest  26,342  in McDonalds on September 3, 2024 and sell it today you would earn a total of  3,259  from holding McDonalds or generate 12.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy63.43%
ValuesDaily Returns

McDonalds  vs.  KIM 225 01 DEC 31

 Performance 
       Timeline  
McDonalds 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 3 (%) 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.
KIM 225 01 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KIM 225 01 DEC 31 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 49446RAY5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

McDonalds and 49446RAY5 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds and 49446RAY5

The main advantage of trading using opposite McDonalds and 49446RAY5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, 49446RAY5 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 49446RAY5 will offset losses from the drop in 49446RAY5's long position.
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The idea behind McDonalds and KIM 225 01 DEC 31 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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