Correlation Between McDonalds and 743820AA0

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Can any of the company-specific risk be diversified away by investing in both McDonalds and 743820AA0 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 743820AA0 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and US743820AA01, you can compare the effects of market volatilities on McDonalds and 743820AA0 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 743820AA0. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and 743820AA0.

Diversification Opportunities for McDonalds and 743820AA0

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between McDonalds and 743820AA0 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and US743820AA01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US743820AA01 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 743820AA0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US743820AA01 has no effect on the direction of McDonalds i.e., McDonalds and 743820AA0 go up and down completely randomly.

Pair Corralation between McDonalds and 743820AA0

Considering the 90-day investment horizon McDonalds is expected to generate 0.98 times more return on investment than 743820AA0. However, McDonalds is 1.02 times less risky than 743820AA0. It trades about -0.06 of its potential returns per unit of risk. US743820AA01 is currently generating about -0.09 per unit of risk. If you would invest  29,086  in McDonalds on October 25, 2024 and sell it today you would lose (951.00) from holding McDonalds or give up 3.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy86.44%
ValuesDaily Returns

McDonalds  vs.  US743820AA01

 Performance 
       Timeline  
McDonalds 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days McDonalds has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
US743820AA01 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days US743820AA01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 743820AA0 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

McDonalds and 743820AA0 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds and 743820AA0

The main advantage of trading using opposite McDonalds and 743820AA0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, 743820AA0 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 743820AA0 will offset losses from the drop in 743820AA0's long position.
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The idea behind McDonalds and US743820AA01 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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