Correlation Between McDonalds Corp and Restaurant Brands
Can any of the company-specific risk be diversified away by investing in both McDonalds Corp and Restaurant 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 Corp and Restaurant Brands 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 Restaurant Brands International, you can compare the effects of market volatilities on McDonalds Corp and Restaurant 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 Corp with a short position of Restaurant Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds Corp and Restaurant Brands.
Diversification Opportunities for McDonalds Corp and Restaurant Brands
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between McDonalds and Restaurant is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp CDR and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands 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 Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of McDonalds Corp i.e., McDonalds Corp and Restaurant Brands go up and down completely randomly.
Pair Corralation between McDonalds Corp and Restaurant Brands
Assuming the 90 days trading horizon McDonalds Corp CDR is expected to generate 0.86 times more return on investment than Restaurant Brands. However, McDonalds Corp CDR is 1.16 times less risky than Restaurant Brands. It trades about 0.08 of its potential returns per unit of risk. Restaurant Brands International is currently generating about 0.04 per unit of risk. If you would invest 2,562 in McDonalds Corp CDR on September 1, 2024 and sell it today you would earn a total of 37.00 from holding McDonalds Corp CDR or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
McDonalds Corp CDR vs. Restaurant Brands Internationa
Performance |
| Timeline |
| McDonalds Corp CDR |
| Restaurant Brands |
McDonalds Corp and Restaurant Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds Corp and Restaurant Brands
The main advantage of trading using opposite McDonalds Corp and Restaurant Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, Restaurant 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 Restaurant Brands will offset losses from the drop in Restaurant Brands' long position.| McDonalds Corp vs. Restaurant Brands International | McDonalds Corp vs. Enghouse Systems | McDonalds Corp vs. Metro Inc | McDonalds Corp vs. BRP Inc |
| Restaurant Brands vs. Canadian Tire | Restaurant Brands vs. Dollarama | Restaurant Brands vs. Nutrien | Restaurant Brands vs. Magna International |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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