Correlation Between McDonalds and Vortex Brands
Can any of the company-specific risk be diversified away by investing in both McDonalds and Vortex Brands 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 Vortex Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Vortex Brands Co, you can compare the effects of market volatilities on McDonalds and Vortex Brands 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 Vortex Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Vortex Brands.
Diversification Opportunities for McDonalds and Vortex Brands
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Vortex is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Vortex Brands Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vortex Brands 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 Vortex Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vortex Brands has no effect on the direction of McDonalds i.e., McDonalds and Vortex Brands go up and down completely randomly.
Pair Corralation between McDonalds and Vortex Brands
Considering the 90-day investment horizon McDonalds is expected to generate 54.81 times less return on investment than Vortex Brands. But when comparing it to its historical volatility, McDonalds is 17.63 times less risky than Vortex Brands. It trades about 0.03 of its potential returns per unit of risk. Vortex Brands Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.03 in Vortex Brands Co on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Vortex Brands Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Vortex Brands Co
Performance |
| Timeline |
| McDonalds |
| Vortex Brands |
McDonalds and Vortex Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Vortex Brands
The main advantage of trading using opposite McDonalds and Vortex Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Vortex Brands 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 Vortex Brands will offset losses from the drop in Vortex Brands' long position.| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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