Correlation Between Visteon Corp and McDonalds
Can any of the company-specific risk be diversified away by investing in both Visteon Corp 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 Visteon Corp and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visteon Corp and McDonalds, you can compare the effects of market volatilities on Visteon Corp 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 Visteon Corp with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visteon Corp and McDonalds.
Diversification Opportunities for Visteon Corp and McDonalds
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Visteon and McDonalds is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visteon Corp and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Visteon Corp 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 Visteon Corp 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 Visteon Corp i.e., Visteon Corp and McDonalds go up and down completely randomly.
Pair Corralation between Visteon Corp and McDonalds
Allowing for the 90-day total investment horizon Visteon Corp is expected to under-perform the McDonalds. In addition to that, Visteon Corp is 1.99 times more volatile than McDonalds. It trades about -0.04 of its total potential returns per unit of risk. McDonalds is currently generating about 0.03 per unit of volatility. If you would invest 26,084 in McDonalds on August 26, 2024 and sell it today you would earn a total of 2,944 from holding McDonalds or generate 11.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visteon Corp vs. McDonalds
Performance |
| Timeline |
| Visteon Corp |
| McDonalds |
Visteon Corp and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visteon Corp and McDonalds
The main advantage of trading using opposite Visteon Corp and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visteon Corp 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.| Visteon Corp vs. Fox Factory Holding | Visteon Corp vs. LKQ Corporation | Visteon Corp vs. Commercial Vehicle Group |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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