Correlation Between GMxico Transportes and McDonalds

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

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

Diversification Opportunities for GMxico Transportes and McDonalds

-0.26

Correlation Coefficient

GMxico Transportes  McDonalds

Very good diversification

The 3 months correlation between GMxico and McDonalds is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding GMxico Transportes SAB and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and GMxico Transportes 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 GMxico Transportes SAB 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 GMxico Transportes i.e., GMxico Transportes and McDonalds go up and down completely randomly.

Pair Corralation between GMxico Transportes and McDonalds

Assuming the 90 days trading horizon GMxico Transportes is expected to generate 4.54 times less return on investment than McDonalds. In addition to that, GMxico Transportes is 1.48 times more volatile than McDonalds. It trades about 0.01 of its total potential returns per unit of risk. McDonalds is currently generating about 0.07 per unit of volatility. If you would invest  564,273  in McDonalds on September 17, 2024 and sell it today you would earn a total of  34,227  from holding McDonalds or generate 6.07% return on investment over 90 days.

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

GMxico Transportes SAB  vs.  McDonalds

GMxico Transportes SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMxico Transportes SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GMxico Transportes is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

McDonalds

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GMxico Transportes and McDonalds

The main advantage of trading using opposite GMxico Transportes and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMxico Transportes 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 GMxico Transportes SAB 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.