Correlation Between Akamai Technologies, and McDonalds

Can any of the company-specific risk be diversified away by investing in both Akamai Technologies, 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 Akamai Technologies, and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Akamai Technologies, and McDonalds, you can compare the effects of market volatilities on Akamai Technologies, 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 Akamai Technologies, with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akamai Technologies, and McDonalds.

Diversification Opportunities for Akamai Technologies, and McDonalds

0.57

Correlation Coefficient

Akamai Technologies,  McDonalds

Very weak diversification

The 3 months correlation between Akamai and McDonalds is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies, and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Akamai Technologies, 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 Akamai Technologies, 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 Akamai Technologies, i.e., Akamai Technologies, and McDonalds go up and down completely randomly.

Pair Corralation between Akamai Technologies, and McDonalds

Assuming the 90 days trading horizon Akamai Technologies, is expected to generate 1.15 times less return on investment than McDonalds. In addition to that, Akamai Technologies, is 1.68 times more volatile than McDonalds. It trades about 0.03 of its total potential returns per unit of risk. McDonalds is currently generating about 0.05 per unit of volatility. If you would invest  8,469  in McDonalds on October 10, 2024 and sell it today you would earn a total of  356.00  from holding McDonalds or generate 4.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Akamai Technologies,  vs.  McDonalds

Akamai Technologies,

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akamai Technologies, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Akamai Technologies, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

McDonalds

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, McDonalds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Akamai Technologies, and McDonalds

The main advantage of trading using opposite Akamai Technologies, and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akamai Technologies, 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 Akamai Technologies, 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.