Correlation Between McDonalds and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both McDonalds and APPLIED MATERIALS 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 APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and APPLIED MATERIALS, you can compare the effects of market volatilities on McDonalds and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and APPLIED MATERIALS.
Diversification Opportunities for McDonalds and APPLIED MATERIALS
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between McDonalds and APPLIED is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of McDonalds i.e., McDonalds and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between McDonalds and APPLIED MATERIALS
Assuming the 90 days trading horizon McDonalds is expected to generate 3.48 times less return on investment than APPLIED MATERIALS. But when comparing it to its historical volatility, McDonalds is 2.44 times less risky than APPLIED MATERIALS. It trades about 0.03 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12,509 in APPLIED MATERIALS on September 12, 2024 and sell it today you would earn a total of 3,873 from holding APPLIED MATERIALS or generate 30.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
McDonalds vs. APPLIED MATERIALS
Performance |
| Timeline |
| McDonalds |
| APPLIED MATERIALS |
McDonalds and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and APPLIED MATERIALS
The main advantage of trading using opposite McDonalds and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, APPLIED MATERIALS 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 APPLIED MATERIALS will offset losses from the drop in APPLIED MATERIALS's long position.| McDonalds vs. VIRGIN WINES UK | McDonalds vs. Titan Machinery | McDonalds vs. Dairy Farm International | McDonalds vs. Sumitomo Mitsui Construction |
| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |