Correlation Between Weyco and McDonalds
Can any of the company-specific risk be diversified away by investing in both Weyco 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 Weyco and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weyco Group and McDonalds, you can compare the effects of market volatilities on Weyco 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 Weyco with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weyco and McDonalds.
Diversification Opportunities for Weyco and McDonalds
Very good diversification
The 3 months correlation between Weyco and McDonalds is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Weyco 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 Weyco Group 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 Weyco i.e., Weyco and McDonalds go up and down completely randomly.
Pair Corralation between Weyco and McDonalds
Given the investment horizon of 90 days Weyco Group is expected to under-perform the McDonalds. In addition to that, Weyco is 1.8 times more volatile than McDonalds. It trades about -0.18 of its total potential returns per unit of risk. McDonalds is currently generating about -0.24 per unit of volatility. If you would invest 29,129 in McDonalds on October 22, 2024 and sell it today you would lose (1,034) from holding McDonalds or give up 3.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weyco Group vs. McDonalds
Performance |
| Timeline |
| Weyco Group |
| McDonalds |
Weyco and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weyco and McDonalds
The main advantage of trading using opposite Weyco and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco 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.The idea behind Weyco Group and McDonalds pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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