Correlation Between McDonalds and ZincX Resources
Can any of the company-specific risk be diversified away by investing in both McDonalds and ZincX Resources 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 ZincX Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and ZincX Resources Corp, you can compare the effects of market volatilities on McDonalds and ZincX Resources 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 ZincX Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and ZincX Resources.
Diversification Opportunities for McDonalds and ZincX Resources
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between McDonalds and ZincX is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and ZincX Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZincX Resources Corp 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 ZincX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZincX Resources Corp has no effect on the direction of McDonalds i.e., McDonalds and ZincX Resources go up and down completely randomly.
Pair Corralation between McDonalds and ZincX Resources
Considering the 90-day investment horizon McDonalds is expected to generate 1.57 times less return on investment than ZincX Resources. But when comparing it to its historical volatility, McDonalds is 4.98 times less risky than ZincX Resources. It trades about 0.05 of its potential returns per unit of risk. ZincX Resources Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 9.00 in ZincX Resources Corp on December 11, 2024 and sell it today you would lose (2.00) from holding ZincX Resources Corp or give up 22.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds vs. ZincX Resources Corp
Performance |
| Timeline |
| McDonalds |
| ZincX Resources Corp |
McDonalds and ZincX Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and ZincX Resources
The main advantage of trading using opposite McDonalds and ZincX Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, ZincX Resources 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 ZincX Resources will offset losses from the drop in ZincX Resources' long position.| McDonalds vs. MGM Resorts International | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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