Correlation Between McDonalds and Aurora Acquisition

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

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

Diversification Opportunities for McDonalds and Aurora Acquisition

-0.43

Correlation Coefficient

McDonalds  Aurora Acquisition

Very good diversification

The 3 months correlation between McDonalds and Aurora is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Aurora Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Acquisition Corp and McDonalds 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 McDonalds are associated (or correlated) with Aurora Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Acquisition Corp has no effect on the direction of McDonalds i.e., McDonalds and Aurora Acquisition go up and down completely randomly.

Pair Corralation between McDonalds and Aurora Acquisition

Considering the 90-day investment horizon McDonalds is expected to generate 2.38 times more return on investment than Aurora Acquisition. However, McDonalds is 2.38 times more volatile than Aurora Acquisition Corp. It trades about 0.04 of its potential returns per unit of risk. Aurora Acquisition Corp is currently generating about 0.05 per unit of risk. If you would invest  25,158  in McDonalds on September 20, 2024 and sell it today you would earn a total of  4,450  from holding McDonalds or generate 17.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.28%
Values	Daily Returns

McDonalds  vs.  Aurora Acquisition Corp

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.

Aurora Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurora Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Aurora Acquisition is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with McDonalds and Aurora Acquisition

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

The idea behind McDonalds and Aurora Acquisition Corp 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 CEOs Directory module to screen CEOs from public companies around the world.