Correlation Between Astar and McDonalds

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

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

Diversification Opportunities for Astar and McDonalds

0.15

Correlation Coefficient

Astar  McDonalds

Average diversification

The 3 months correlation between Astar and McDonalds is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Astar and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Astar 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 Astar 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 Astar i.e., Astar and McDonalds go up and down completely randomly.

Pair Corralation between Astar and McDonalds

Assuming the 90 days trading horizon Astar is expected to under-perform the McDonalds. In addition to that, Astar is 3.62 times more volatile than McDonalds. It trades about -0.02 of its total potential returns per unit of risk. McDonalds is currently generating about 0.07 per unit of volatility. If you would invest  7,087  in McDonalds on October 9, 2024 and sell it today you would earn a total of  1,738  from holding McDonalds or generate 24.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.53%
Values	Daily Returns

Astar  vs.  McDonalds

Astar

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Astar are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Astar exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Astar and McDonalds

The main advantage of trading using opposite Astar and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astar 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 Astar 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.