Correlation Between Jollibee Foods and McDonalds Holdings

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

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

Diversification Opportunities for Jollibee Foods and McDonalds Holdings

0.18

Correlation Coefficient

Jollibee Foods  McDonalds Holdings

Average diversification

The 3 months correlation between Jollibee and McDonalds is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Jollibee Foods Corp and McDonalds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Holdings and Jollibee Foods 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 Jollibee Foods Corp are associated (or correlated) with McDonalds Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Holdings has no effect on the direction of Jollibee Foods i.e., Jollibee Foods and McDonalds Holdings go up and down completely randomly.

Pair Corralation between Jollibee Foods and McDonalds Holdings

Assuming the 90 days horizon Jollibee Foods Corp is expected to under-perform the McDonalds Holdings. In addition to that, Jollibee Foods is 2.31 times more volatile than McDonalds Holdings. It trades about -0.02 of its total potential returns per unit of risk. McDonalds Holdings is currently generating about 0.0 per unit of volatility. If you would invest  3,729  in McDonalds Holdings on December 30, 2024 and sell it today you would lose (24.00) from holding McDonalds Holdings or give up 0.64% of portfolio value over 90 days.

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

Jollibee Foods Corp  vs.  McDonalds Holdings

Jollibee Foods Corp

Risk-Adjusted Performance

Very Weak

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

McDonalds Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days McDonalds Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, McDonalds Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Jollibee Foods and McDonalds Holdings

The main advantage of trading using opposite Jollibee Foods and McDonalds Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jollibee Foods position performs unexpectedly, McDonalds Holdings 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 Holdings will offset losses from the drop in McDonalds Holdings' long position.

The idea behind Jollibee Foods Corp and McDonalds Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.