Correlation Between Keg Royalties and McDonalds Corp

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

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

Diversification Opportunities for Keg Royalties and McDonalds Corp

-0.54

Correlation Coefficient

Keg Royalties  McDonalds Corp

Excellent diversification

The 3 months correlation between Keg and McDonalds is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Keg Royalties and McDonalds Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp CDR and Keg Royalties 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 The Keg Royalties are associated (or correlated) with McDonalds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Corp CDR has no effect on the direction of Keg Royalties i.e., Keg Royalties and McDonalds Corp go up and down completely randomly.

Pair Corralation between Keg Royalties and McDonalds Corp

Assuming the 90 days trading horizon The Keg Royalties is expected to under-perform the McDonalds Corp. But the stock apears to be less risky and, when comparing its historical volatility, The Keg Royalties is 1.13 times less risky than McDonalds Corp. The stock trades about -0.07 of its potential returns per unit of risk. The McDonalds Corp CDR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,550  in McDonalds Corp CDR on December 24, 2024 and sell it today you would earn a total of  109.00  from holding McDonalds Corp CDR or generate 4.27% return on investment over 90 days.

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

The Keg Royalties  vs.  McDonalds Corp CDR

Keg Royalties

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Keg Royalties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Keg Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

McDonalds Corp CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds Corp CDR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, McDonalds Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Keg Royalties and McDonalds Corp

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

The idea behind The Keg Royalties and McDonalds Corp CDR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.