Correlation Between A W and McDonalds Corp

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

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

Diversification Opportunities for A W and McDonalds Corp

0.24

Correlation Coefficient

A W  McDonalds Corp

Modest diversification

The 3 months correlation between A W and McDonalds is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding A W FOOD and McDonalds Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp CDR and A W 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 A W FOOD are associated (or correlated) with McDonalds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Corp CDR has no effect on the direction of A W i.e., A W and McDonalds Corp go up and down completely randomly.

Pair Corralation between A W and McDonalds Corp

Assuming the 90 days horizon A W FOOD is expected to under-perform the McDonalds Corp. In addition to that, A W is 1.34 times more volatile than McDonalds Corp CDR. It trades about -0.15 of its total potential returns per unit of risk. McDonalds Corp CDR is currently generating about 0.02 per unit of volatility. If you would invest  2,477  in McDonalds Corp CDR on October 2, 2024 and sell it today you would earn a total of  61.00  from holding McDonalds Corp CDR or generate 2.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	22.03%
Values	Daily Returns

A W FOOD  vs.  McDonalds Corp CDR

A W FOOD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days A W FOOD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic 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 Corp CDR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with A W and McDonalds Corp

The main advantage of trading using opposite A W and McDonalds Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A W position performs unexpectedly, McDonalds Corp 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 Corp will offset losses from the drop in McDonalds Corp's long position.

The idea behind A W FOOD and McDonalds Corp CDR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.