Correlation Between DATA MODUL and McDonalds

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

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

Diversification Opportunities for DATA MODUL and McDonalds

-0.52

Correlation Coefficient

DATA MODUL  McDonalds

Excellent diversification

The 3 months correlation between DATA and McDonalds is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding DATA MODUL and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and DATA MODUL 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 DATA MODUL 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 DATA MODUL i.e., DATA MODUL and McDonalds go up and down completely randomly.

Pair Corralation between DATA MODUL and McDonalds

Assuming the 90 days trading horizon DATA MODUL is expected to under-perform the McDonalds. In addition to that, DATA MODUL is 1.69 times more volatile than McDonalds. It trades about -0.01 of its total potential returns per unit of risk. McDonalds is currently generating about 0.0 per unit of volatility. If you would invest  27,779  in McDonalds on December 21, 2024 and sell it today you would lose (54.00) from holding McDonalds or give up 0.19% of portfolio value over 90 days.

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

DATA MODUL   vs.  McDonalds

DATA MODUL

Risk-Adjusted Performance

Very Weak

Over the last 90 days DATA MODUL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, DATA MODUL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 nearly stable basic indicators, McDonalds is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DATA MODUL and McDonalds

The main advantage of trading using opposite DATA MODUL and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATA MODUL 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 DATA MODUL 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.