Correlation Between Cheniere Energy and MCDONALDS

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

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

Diversification Opportunities for Cheniere Energy and MCDONALDS

-0.36

Correlation Coefficient

Cheniere Energy  MCDONALDS

Very good diversification

The 3 months correlation between Cheniere and MCDONALDS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and MCDONALDS PORATION MTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCDONALDS PORATION MTN and Cheniere Energy 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 Cheniere Energy Partners 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 PORATION MTN has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and MCDONALDS go up and down completely randomly.

Pair Corralation between Cheniere Energy and MCDONALDS

Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 1.45 times more return on investment than MCDONALDS. However, Cheniere Energy is 1.45 times more volatile than MCDONALDS PORATION MTN. It trades about 0.21 of its potential returns per unit of risk. MCDONALDS PORATION MTN is currently generating about 0.03 per unit of risk. If you would invest  4,784  in Cheniere Energy Partners on September 4, 2024 and sell it today you would earn a total of  929.00  from holding Cheniere Energy Partners or generate 19.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Cheniere Energy Partners  vs.  MCDONALDS PORATION MTN

Cheniere Energy Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

MCDONALDS PORATION MTN

Risk-Adjusted Performance

2 of 100

Very Weak

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

Pair Trading with Cheniere Energy and MCDONALDS

The main advantage of trading using opposite Cheniere Energy and MCDONALDS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy 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's long position.

The idea behind Cheniere Energy Partners and MCDONALDS PORATION MTN 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.