Correlation Between Grupo Sports and McDonalds
Can any of the company-specific risk be diversified away by investing in both Grupo Sports 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 Grupo Sports and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grupo Sports World and McDonalds, you can compare the effects of market volatilities on Grupo Sports 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 Grupo Sports with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Sports and McDonalds.
Diversification Opportunities for Grupo Sports and McDonalds
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Grupo and McDonalds is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Sports World and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Grupo Sports 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 Grupo Sports World 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 Grupo Sports i.e., Grupo Sports and McDonalds go up and down completely randomly.
Pair Corralation between Grupo Sports and McDonalds
Assuming the 90 days trading horizon Grupo Sports is expected to generate 1.03 times less return on investment than McDonalds. But when comparing it to its historical volatility, Grupo Sports World is 1.06 times less risky than McDonalds. It trades about 0.06 of its potential returns per unit of risk. McDonalds is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 586,447 in McDonalds on September 4, 2024 and sell it today you would earn a total of 9,553 from holding McDonalds or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grupo Sports World vs. McDonalds
Performance |
| Timeline |
| Grupo Sports World |
| McDonalds |
Grupo Sports and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grupo Sports and McDonalds
The main advantage of trading using opposite Grupo Sports and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Sports 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.| Grupo Sports vs. McEwen Mining | Grupo Sports vs. Costco Wholesale | Grupo Sports vs. Hoteles City Express | Grupo Sports vs. GMxico Transportes SAB |
| McDonalds vs. KB Home | McDonalds vs. Grupo Sports World | McDonalds vs. Monster Beverage Corp | McDonalds vs. FIBRA Storage |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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