Correlation Between McDonalds and Vanguard Utilities
Can any of the company-specific risk be diversified away by investing in both McDonalds and Vanguard Utilities 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 Vanguard Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Vanguard Utilities Index, you can compare the effects of market volatilities on McDonalds and Vanguard Utilities 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 Vanguard Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Vanguard Utilities.
Diversification Opportunities for McDonalds and Vanguard Utilities
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and Vanguard is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Vanguard Utilities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Utilities Index 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 Vanguard Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Utilities Index has no effect on the direction of McDonalds i.e., McDonalds and Vanguard Utilities go up and down completely randomly.
Pair Corralation between McDonalds and Vanguard Utilities
Considering the 90-day investment horizon McDonalds is expected to generate 16.57 times less return on investment than Vanguard Utilities. In addition to that, McDonalds is 1.27 times more volatile than Vanguard Utilities Index. It trades about 0.01 of its total potential returns per unit of risk. Vanguard Utilities Index is currently generating about 0.18 per unit of volatility. If you would invest 13,121 in Vanguard Utilities Index on August 27, 2024 and sell it today you would earn a total of 4,484 from holding Vanguard Utilities Index or generate 34.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Vanguard Utilities Index
Performance |
| Timeline |
| McDonalds |
| Vanguard Utilities Index |
McDonalds and Vanguard Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Vanguard Utilities
The main advantage of trading using opposite McDonalds and Vanguard Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Vanguard Utilities 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 Vanguard Utilities will offset losses from the drop in Vanguard Utilities' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
| Vanguard Utilities vs. Vanguard Consumer Staples | Vanguard Utilities vs. Vanguard Materials Index | Vanguard Utilities vs. Vanguard Communication Services | Vanguard Utilities vs. Vanguard Financials Index |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |