Correlation Between McDonalds and National Beverage
Can any of the company-specific risk be diversified away by investing in both McDonalds and National Beverage 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 National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and National Beverage Corp, you can compare the effects of market volatilities on McDonalds and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and National Beverage.
Diversification Opportunities for McDonalds and National Beverage
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between McDonalds and National is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of McDonalds i.e., McDonalds and National Beverage go up and down completely randomly.
Pair Corralation between McDonalds and National Beverage
Assuming the 90 days trading horizon McDonalds is expected to generate 5.42 times less return on investment than National Beverage. But when comparing it to its historical volatility, McDonalds is 1.52 times less risky than National Beverage. It trades about 0.03 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,100 in National Beverage Corp on September 12, 2024 and sell it today you would earn a total of 260.00 from holding National Beverage Corp or generate 6.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
McDonalds vs. National Beverage Corp
Performance |
| Timeline |
| McDonalds |
| National Beverage Corp |
McDonalds and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and National Beverage
The main advantage of trading using opposite McDonalds and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| McDonalds vs. VIRGIN WINES UK | McDonalds vs. Titan Machinery | McDonalds vs. Dairy Farm International | McDonalds vs. Sumitomo Mitsui Construction |
| National Beverage vs. Superior Plus Corp | National Beverage vs. SIVERS SEMICONDUCTORS AB | National Beverage vs. NorAm Drilling AS | National Beverage vs. Norsk Hydro ASA |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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