Correlation Between FEMALE HEALTH and McDonalds
Can any of the company-specific risk be diversified away by investing in both FEMALE HEALTH 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 FEMALE HEALTH and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FEMALE HEALTH and McDonalds, you can compare the effects of market volatilities on FEMALE HEALTH 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 FEMALE HEALTH with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of FEMALE HEALTH and McDonalds.
Diversification Opportunities for FEMALE HEALTH and McDonalds
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between FEMALE and McDonalds is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding FEMALE HEALTH and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and FEMALE HEALTH 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 FEMALE HEALTH 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 FEMALE HEALTH i.e., FEMALE HEALTH and McDonalds go up and down completely randomly.
Pair Corralation between FEMALE HEALTH and McDonalds
Assuming the 90 days trading horizon FEMALE HEALTH is expected to under-perform the McDonalds. In addition to that, FEMALE HEALTH is 5.88 times more volatile than McDonalds. It trades about -0.04 of its total potential returns per unit of risk. McDonalds is currently generating about 0.04 per unit of volatility. If you would invest 23,533 in McDonalds on October 4, 2024 and sell it today you would earn a total of 5,022 from holding McDonalds or generate 21.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
FEMALE HEALTH vs. McDonalds
Performance |
Timeline |
FEMALE HEALTH |
McDonalds |
FEMALE HEALTH and McDonalds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FEMALE HEALTH and McDonalds
The main advantage of trading using opposite FEMALE HEALTH and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEMALE HEALTH 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.FEMALE HEALTH vs. Apple Inc | FEMALE HEALTH vs. Apple Inc | FEMALE HEALTH vs. Apple Inc | FEMALE HEALTH vs. Apple Inc |
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Check out your portfolio center.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.
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