Correlation Between Samsung Electronics and McDonalds
Can any of the company-specific risk be diversified away by investing in both Samsung Electronics 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 Samsung Electronics and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Samsung Electronics Co and McDonalds, you can compare the effects of market volatilities on Samsung Electronics 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 Samsung Electronics with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Samsung Electronics and McDonalds.
Diversification Opportunities for Samsung Electronics and McDonalds
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Samsung and McDonalds is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and McDonalds go up and down completely randomly.
Pair Corralation between Samsung Electronics and McDonalds
Assuming the 90 days horizon Samsung Electronics Co is expected to under-perform the McDonalds. In addition to that, Samsung Electronics is 2.53 times more volatile than McDonalds. It trades about -0.07 of its total potential returns per unit of risk. McDonalds is currently generating about 0.16 per unit of volatility. If you would invest 26,815 in McDonalds on September 1, 2024 and sell it today you would earn a total of 1,090 from holding McDonalds or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Samsung Electronics Co vs. McDonalds
Performance |
| Timeline |
| Samsung Electronics |
| McDonalds |
Samsung Electronics and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Samsung Electronics and McDonalds
The main advantage of trading using opposite Samsung Electronics and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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.| Samsung Electronics vs. QINGCI GAMES INC | Samsung Electronics vs. GAMESTOP | Samsung Electronics vs. CI GAMES SA | Samsung Electronics vs. Tencent Music Entertainment |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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