Correlation Between Cardano and McDonalds

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

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

Diversification Opportunities for Cardano and McDonalds

-0.02

Correlation Coefficient

Cardano  McDonalds

Good diversification

The 3 months correlation between Cardano and McDonalds is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Cardano 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 Cardano 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 Cardano i.e., Cardano and McDonalds go up and down completely randomly.

Pair Corralation between Cardano and McDonalds

Assuming the 90 days trading horizon Cardano is expected to generate 5.37 times more return on investment than McDonalds. However, Cardano is 5.37 times more volatile than McDonalds. It trades about -0.01 of its potential returns per unit of risk. McDonalds is currently generating about -0.04 per unit of risk. If you would invest  86.00  in Cardano on December 25, 2024 and sell it today you would lose (16.00) from holding Cardano or give up 18.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Cardano  vs.  McDonalds

Cardano

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cardano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cardano is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

McDonalds

Risk-Adjusted Performance

Very Weak

Over the last 90 days McDonalds has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Cardano and McDonalds

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

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.