Correlation Between Nathans Famous and McDonalds Holdings
Can any of the company-specific risk be diversified away by investing in both Nathans Famous and McDonalds Holdings 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 Nathans Famous and McDonalds Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nathans Famous and McDonalds Holdings, you can compare the effects of market volatilities on Nathans Famous and McDonalds Holdings 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 Nathans Famous with a short position of McDonalds Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nathans Famous and McDonalds Holdings.
Diversification Opportunities for Nathans Famous and McDonalds Holdings
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nathans and McDonalds is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nathans Famous and McDonalds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Holdings and Nathans Famous 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 Nathans Famous are associated (or correlated) with McDonalds Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Holdings has no effect on the direction of Nathans Famous i.e., Nathans Famous and McDonalds Holdings go up and down completely randomly.
Pair Corralation between Nathans Famous and McDonalds Holdings
Given the investment horizon of 90 days Nathans Famous is expected to generate 1.45 times more return on investment than McDonalds Holdings. However, Nathans Famous is 1.45 times more volatile than McDonalds Holdings. It trades about 0.12 of its potential returns per unit of risk. McDonalds Holdings is currently generating about -0.03 per unit of risk. If you would invest 6,716 in Nathans Famous on August 30, 2024 and sell it today you would earn a total of 1,992 from holding Nathans Famous or generate 29.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nathans Famous vs. McDonalds Holdings
Performance |
| Timeline |
| Nathans Famous |
| McDonalds Holdings |
Nathans Famous and McDonalds Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nathans Famous and McDonalds Holdings
The main advantage of trading using opposite Nathans Famous and McDonalds Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nathans Famous position performs unexpectedly, McDonalds Holdings 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 McDonalds Holdings will offset losses from the drop in McDonalds Holdings' long position.| Nathans Famous vs. Noble Romans | Nathans Famous vs. Good Times Restaurants | Nathans Famous vs. Bagger Daves Burger | Nathans Famous vs. Flanigans Enterprises |
| McDonalds Holdings vs. McDonalds | McDonalds Holdings vs. Starbucks | McDonalds Holdings vs. Chipotle Mexican Grill | McDonalds Holdings vs. Yum Brands |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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