Correlation Between McDonalds and Weyco
Can any of the company-specific risk be diversified away by investing in both McDonalds and Weyco 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 Weyco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Weyco Group, you can compare the effects of market volatilities on McDonalds and Weyco 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 Weyco. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Weyco.
Diversification Opportunities for McDonalds and Weyco
Significant diversification
The 3 months correlation between McDonalds and Weyco is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco Group 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 Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of McDonalds i.e., McDonalds and Weyco go up and down completely randomly.
Pair Corralation between McDonalds and Weyco
Considering the 90-day investment horizon McDonalds is expected to under-perform the Weyco. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds is 1.44 times less risky than Weyco. The stock trades about -0.06 of its potential returns per unit of risk. The Weyco Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,674 in Weyco Group on November 3, 2024 and sell it today you would lose (27.47) from holding Weyco Group or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. Weyco Group
Performance |
| Timeline |
| McDonalds |
| Weyco Group |
McDonalds and Weyco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Weyco
The main advantage of trading using opposite McDonalds and Weyco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Weyco 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 Weyco will offset losses from the drop in Weyco's long position.| McDonalds vs. ProShares Russell Dividend | McDonalds vs. United Rentals | McDonalds vs. Kforce Inc | McDonalds vs. The Ensign Group |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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