Correlation Between Alsea SAB and McDonalds

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

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

Diversification Opportunities for Alsea SAB and McDonalds

-0.25

Correlation Coefficient

Alsea SAB  McDonalds

Very good diversification

The 3 months correlation between Alsea and McDonalds is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Alsea SAB de and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Alsea SAB 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 Alsea SAB de 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 Alsea SAB i.e., Alsea SAB and McDonalds go up and down completely randomly.

Pair Corralation between Alsea SAB and McDonalds

Assuming the 90 days trading horizon Alsea SAB de is expected to under-perform the McDonalds. In addition to that, Alsea SAB is 1.21 times more volatile than McDonalds. It trades about -0.14 of its total potential returns per unit of risk. McDonalds is currently generating about 0.07 per unit of volatility. If you would invest  564,273  in McDonalds on September 17, 2024 and sell it today you would earn a total of  34,227  from holding McDonalds or generate 6.07% return on investment over 90 days.

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

Alsea SAB de  vs.  McDonalds

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

McDonalds

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Alsea SAB and McDonalds

The main advantage of trading using opposite Alsea SAB and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alsea SAB 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 Alsea SAB de 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.