Correlation Between McDonalds and LG Display
Can any of the company-specific risk be diversified away by investing in both McDonalds and LG Display 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 LG Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and LG Display Co, you can compare the effects of market volatilities on McDonalds and LG Display 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 LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and LG Display.
Diversification Opportunities for McDonalds and LG Display
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and LGA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display 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 LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of McDonalds i.e., McDonalds and LG Display go up and down completely randomly.
Pair Corralation between McDonalds and LG Display
Assuming the 90 days horizon McDonalds is expected to generate 0.41 times more return on investment than LG Display. However, McDonalds is 2.42 times less risky than LG Display. It trades about 0.05 of its potential returns per unit of risk. LG Display Co is currently generating about -0.04 per unit of risk. If you would invest 24,383 in McDonalds on September 1, 2024 and sell it today you would earn a total of 3,522 from holding McDonalds or generate 14.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.64% |
| Values | Daily Returns |
McDonalds vs. LG Display Co
Performance |
| Timeline |
| McDonalds |
| LG Display |
McDonalds and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and LG Display
The main advantage of trading using opposite McDonalds and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.The idea behind McDonalds and LG Display Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| LG Display vs. Apple Inc | LG Display vs. Apple Inc | LG Display vs. Samsung Electronics Co | LG Display vs. Samsung Electronics Co |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |