Correlation Between McDonalds and Forwardly

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

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

Diversification Opportunities for McDonalds and Forwardly

-0.74

Correlation Coefficient

McDonalds  Forwardly

Pay attention - limited upside

The 3 months correlation between McDonalds and Forwardly is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Forwardly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forwardly 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 Forwardly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forwardly has no effect on the direction of McDonalds i.e., McDonalds and Forwardly go up and down completely randomly.

Pair Corralation between McDonalds and Forwardly

Considering the 90-day investment horizon McDonalds is expected to generate 0.19 times more return on investment than Forwardly. However, McDonalds is 5.32 times less risky than Forwardly. It trades about 0.09 of its potential returns per unit of risk. Forwardly is currently generating about -0.06 per unit of risk. If you would invest  28,794  in McDonalds on December 30, 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

McDonalds  vs.  Forwardly

McDonalds

Risk-Adjusted Performance

Modest

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.

Forwardly

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forwardly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with McDonalds and Forwardly

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

The idea behind McDonalds and Forwardly 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..