Correlation Between Roche Holding and McDonalds
Can any of the company-specific risk be diversified away by investing in both Roche Holding 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 Roche Holding and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roche Holding AG and McDonalds, you can compare the effects of market volatilities on Roche Holding 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 Roche Holding with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and McDonalds.
Diversification Opportunities for Roche Holding and McDonalds
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Roche and McDonalds is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Roche Holding 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 Roche Holding AG 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 Roche Holding i.e., Roche Holding and McDonalds go up and down completely randomly.
Pair Corralation between Roche Holding and McDonalds
Assuming the 90 days horizon Roche Holding AG is expected to generate 3.96 times more return on investment than McDonalds. However, Roche Holding is 3.96 times more volatile than McDonalds. It trades about 0.08 of its potential returns per unit of risk. McDonalds is currently generating about -0.06 per unit of risk. If you would invest 28,571 in Roche Holding AG on October 22, 2024 and sell it today you would earn a total of 2,522 from holding Roche Holding AG or generate 8.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
Roche Holding AG vs. McDonalds
Performance |
| Timeline |
| Roche Holding AG |
| McDonalds |
Roche Holding and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roche Holding and McDonalds
The main advantage of trading using opposite Roche Holding and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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.| Roche Holding vs. Novartis AG | Roche Holding vs. AstraZeneca PLC | Roche Holding vs. Roche Holding Ltd | Roche Holding vs. Sanofi ADR |
| McDonalds vs. Roche Holding AG | McDonalds vs. Champions Oncology | McDonalds vs. Target 2030 Fund | McDonalds vs. The Monarch Cement |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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