Correlation Between McDonalds Corp and A W
Can any of the company-specific risk be diversified away by investing in both McDonalds Corp and A W 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 Corp and A W into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds Corp CDR and A W FOOD, you can compare the effects of market volatilities on McDonalds Corp and A W 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 Corp with a short position of A W. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds Corp and A W.
Diversification Opportunities for McDonalds Corp and A W
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between McDonalds and A W is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp CDR and A W FOOD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A W FOOD and McDonalds Corp 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 Corp CDR are associated (or correlated) with A W. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A W FOOD has no effect on the direction of McDonalds Corp i.e., McDonalds Corp and A W go up and down completely randomly.
Pair Corralation between McDonalds Corp and A W
Assuming the 90 days trading horizon McDonalds Corp CDR is expected to generate 0.64 times more return on investment than A W. However, McDonalds Corp CDR is 1.55 times less risky than A W. It trades about 0.02 of its potential returns per unit of risk. A W FOOD is currently generating about -0.17 per unit of risk. If you would invest 2,259 in McDonalds Corp CDR on October 24, 2024 and sell it today you would earn a total of 207.00 from holding McDonalds Corp CDR or generate 9.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 13.13% |
| Values | Daily Returns |
McDonalds Corp CDR vs. A W FOOD
Performance |
| Timeline |
| McDonalds Corp CDR |
| A W FOOD |
McDonalds Corp and A W Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds Corp and A W
The main advantage of trading using opposite McDonalds Corp and A W positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, A W 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 A W will offset losses from the drop in A W's long position.| McDonalds Corp vs. Ramp Metals | McDonalds Corp vs. NeXGold Mining Corp | McDonalds Corp vs. Nicola Mining |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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