Correlation Between McDonalds and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both McDonalds and Goodyear Tire 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 Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Goodyear Tire Rubber, you can compare the effects of market volatilities on McDonalds and Goodyear Tire 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 Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Goodyear Tire.
Diversification Opportunities for McDonalds and Goodyear Tire
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between McDonalds and Goodyear is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber 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 Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of McDonalds i.e., McDonalds and Goodyear Tire go up and down completely randomly.
Pair Corralation between McDonalds and Goodyear Tire
If you would invest 746.00 in Goodyear Tire Rubber on September 4, 2024 and sell it today you would earn a total of 296.00 from holding Goodyear Tire Rubber or generate 39.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
McDonalds vs. Goodyear Tire Rubber
Performance |
| Timeline |
| McDonalds |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Goodyear Tire Rubber |
McDonalds and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McDonalds and Goodyear Tire
The main advantage of trading using opposite McDonalds and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Goodyear Tire 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 Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.| McDonalds vs. Gamma Communications plc | McDonalds vs. British American Tobacco | McDonalds vs. BRIT AMER TOBACCO | McDonalds vs. MAVEN WIRELESS SWEDEN |
| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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