Correlation Between HelloFresh and McDonalds

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

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

Diversification Opportunities for HelloFresh and McDonalds

-0.53

Correlation Coefficient

HelloFresh  McDonalds

Excellent diversification

The 3 months correlation between HelloFresh and McDonalds is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding HelloFresh SE and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and HelloFresh 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 HelloFresh SE 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 HelloFresh i.e., HelloFresh and McDonalds go up and down completely randomly.

Pair Corralation between HelloFresh and McDonalds

Assuming the 90 days horizon HelloFresh is expected to generate 2.73 times less return on investment than McDonalds. In addition to that, HelloFresh is 4.96 times more volatile than McDonalds. It trades about 0.0 of its total potential returns per unit of risk. McDonalds is currently generating about 0.01 per unit of volatility. If you would invest  27,855  in McDonalds on October 3, 2024 and sell it today you would earn a total of  1,105  from holding McDonalds or generate 3.97% return on investment over 90 days.

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

HelloFresh SE  vs.  McDonalds

HelloFresh SE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HelloFresh SE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, HelloFresh reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HelloFresh and McDonalds

The main advantage of trading using opposite HelloFresh and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HelloFresh 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 HelloFresh SE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.