Correlation Between ANGANG STEEL and McDonalds

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

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

Diversification Opportunities for ANGANG STEEL and McDonalds

-0.07

Correlation Coefficient

ANGANG STEEL  McDonalds

Good diversification

The 3 months correlation between ANGANG and McDonalds is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding ANGANG STEEL H and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and ANGANG STEEL 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 ANGANG STEEL H 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 ANGANG STEEL i.e., ANGANG STEEL and McDonalds go up and down completely randomly.

Pair Corralation between ANGANG STEEL and McDonalds

Assuming the 90 days trading horizon ANGANG STEEL H is expected to under-perform the McDonalds. In addition to that, ANGANG STEEL is 2.68 times more volatile than McDonalds. It trades about -0.04 of its total potential returns per unit of risk. McDonalds is currently generating about -0.07 per unit of volatility. If you would invest  29,010  in McDonalds on October 22, 2024 and sell it today you would lose (1,560) from holding McDonalds or give up 5.38% of portfolio value over 90 days.

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

ANGANG STEEL H   vs.  McDonalds

ANGANG STEEL H

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ANGANG STEEL H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

McDonalds

Risk-Adjusted Performance

0 of 100

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 ANGANG STEEL and McDonalds

The main advantage of trading using opposite ANGANG STEEL and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANGANG STEEL 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 ANGANG STEEL H 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.