Correlation Between Gourmet Provisions and McDonalds

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

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

Diversification Opportunities for Gourmet Provisions and McDonalds

-0.21

Correlation Coefficient

Gourmet Provisions  McDonalds

Very good diversification

The 3 months correlation between Gourmet and McDonalds is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Gourmet Provisions Internation and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Gourmet Provisions 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 Gourmet Provisions International 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 Gourmet Provisions i.e., Gourmet Provisions and McDonalds go up and down completely randomly.

Pair Corralation between Gourmet Provisions and McDonalds

Given the investment horizon of 90 days Gourmet Provisions International is expected to generate 136.58 times more return on investment than McDonalds. However, Gourmet Provisions is 136.58 times more volatile than McDonalds. It trades about 0.17 of its potential returns per unit of risk. McDonalds is currently generating about 0.09 per unit of risk. If you would invest  0.01  in Gourmet Provisions International on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Gourmet Provisions International or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Gourmet Provisions Internation  vs.  McDonalds

Gourmet Provisions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gourmet Provisions International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gourmet Provisions reported solid returns over the last few months and may actually be approaching a breakup point.

McDonalds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gourmet Provisions and McDonalds

The main advantage of trading using opposite Gourmet Provisions and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gourmet Provisions 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 Gourmet Provisions International 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.