Correlation Between Starbucks and McDonalds Holdings
Can any of the company-specific risk be diversified away by investing in both Starbucks 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 Starbucks and McDonalds Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Starbucks and McDonalds Holdings, you can compare the effects of market volatilities on Starbucks 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 Starbucks with a short position of McDonalds Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Starbucks and McDonalds Holdings.
Diversification Opportunities for Starbucks and McDonalds Holdings
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Starbucks and McDonalds is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks and McDonalds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Holdings and Starbucks 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 Starbucks 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 Starbucks i.e., Starbucks and McDonalds Holdings go up and down completely randomly.
Pair Corralation between Starbucks and McDonalds Holdings
Given the investment horizon of 90 days Starbucks is expected to generate 1.1 times more return on investment than McDonalds Holdings. However, Starbucks is 1.1 times more volatile than McDonalds Holdings. It trades about 0.16 of its potential returns per unit of risk. McDonalds Holdings is currently generating about -0.21 per unit of risk. If you would invest 9,679 in Starbucks on August 30, 2024 and sell it today you would earn a total of 472.00 from holding Starbucks or generate 4.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Starbucks vs. McDonalds Holdings
Performance |
| Timeline |
| Starbucks |
| McDonalds Holdings |
Starbucks and McDonalds Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Starbucks and McDonalds Holdings
The main advantage of trading using opposite Starbucks and McDonalds Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks 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.| Starbucks vs. Chipotle Mexican Grill | Starbucks vs. Dominos Pizza | Starbucks vs. Yum Brands | Starbucks vs. The Wendys Co |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |