Correlation Between McDonalds and BJs Restaurants

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

By analyzing existing cross correlation between McDonalds and BJs Restaurants, you can compare the effects of market volatilities on McDonalds and BJs Restaurants 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 BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and BJs Restaurants.

Diversification Opportunities for McDonalds and BJs Restaurants

0.1

Correlation Coefficient

McDonalds  BJs Restaurants

Average diversification

The 3 months correlation between McDonalds and BJs is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants 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 BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of McDonalds i.e., McDonalds and BJs Restaurants go up and down completely randomly.

Pair Corralation between McDonalds and BJs Restaurants

Considering the 90-day investment horizon McDonalds is expected to generate 0.56 times more return on investment than BJs Restaurants. However, McDonalds is 1.79 times less risky than BJs Restaurants. It trades about 0.09 of its potential returns per unit of risk. BJs Restaurants is currently generating about 0.02 per unit of risk. If you would invest  28,794  in McDonalds on December 28, 2024 and sell it today you would earn a total of  1,915  from holding McDonalds or generate 6.65% return on investment over 90 days.

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

McDonalds  vs.  BJs Restaurants

McDonalds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BJs Restaurants

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, BJs Restaurants is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with McDonalds and BJs Restaurants

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

The idea behind McDonalds and BJs Restaurants 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.