Correlation Between BRP and MCDONALDS

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

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

Diversification Opportunities for BRP and MCDONALDS

0.75

Correlation Coefficient

BRP  MCDONALDS

Poor diversification

The 3 months correlation between BRP and MCDONALDS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc 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 BRP 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 BRP Inc 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 BRP i.e., BRP and MCDONALDS go up and down completely randomly.

Pair Corralation between BRP and MCDONALDS

Given the investment horizon of 90 days BRP Inc is expected to under-perform the MCDONALDS. In addition to that, BRP is 2.46 times more volatile than MCDONALDS PORATION MTN. It trades about -0.21 of its total potential returns per unit of risk. MCDONALDS PORATION MTN is currently generating about -0.13 per unit of volatility. If you would invest  9,667  in MCDONALDS PORATION MTN on September 4, 2024 and sell it today you would lose (736.00) from holding MCDONALDS PORATION MTN or give up 7.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

BRP Inc  vs.  MCDONALDS PORATION MTN

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc 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 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 PORATION MTN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MCDONALDS PORATION MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for MCDONALDS PORATION MTN investors.

Pair Trading with BRP and MCDONALDS

The main advantage of trading using opposite BRP and MCDONALDS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP 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 BRP Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.