Correlation Between Portillos and McDonalds
Can any of the company-specific risk be diversified away by investing in both Portillos and McDonalds 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 Portillos and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Portillos and McDonalds, you can compare the effects of market volatilities on Portillos and McDonalds 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 Portillos with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portillos and McDonalds.
Diversification Opportunities for Portillos and McDonalds
Good diversification
The 3 months correlation between Portillos and McDonalds is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Portillos and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Portillos 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 Portillos are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Portillos i.e., Portillos and McDonalds go up and down completely randomly.
Pair Corralation between Portillos and McDonalds
Given the investment horizon of 90 days Portillos is expected to under-perform the McDonalds. In addition to that, Portillos is 2.85 times more volatile than McDonalds. It trades about -0.02 of its total potential returns per unit of risk. McDonalds is currently generating about 0.03 per unit of volatility. If you would invest 25,638 in McDonalds on November 9, 2024 and sell it today you would earn a total of 3,798 from holding McDonalds or generate 14.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Portillos vs. McDonalds
Performance |
| Timeline |
| Portillos |
| McDonalds |
Portillos and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Portillos and McDonalds
The main advantage of trading using opposite Portillos and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Portillos position performs unexpectedly, McDonalds 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 will offset losses from the drop in McDonalds' long position.| Portillos vs. Brinker International | Portillos vs. Bloomin Brands | Portillos vs. Wingstop | Portillos vs. Papa Johns International |
| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza Common | McDonalds 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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