Correlation Between McDonalds and GainClients
Can any of the company-specific risk be diversified away by investing in both McDonalds and GainClients 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 GainClients into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and GainClients, you can compare the effects of market volatilities on McDonalds and GainClients 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 GainClients. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and GainClients.
Diversification Opportunities for McDonalds and GainClients
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and GainClients is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and GainClients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GainClients 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 GainClients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GainClients has no effect on the direction of McDonalds i.e., McDonalds and GainClients go up and down completely randomly.
Pair Corralation between McDonalds and GainClients
Considering the 90-day investment horizon McDonalds is expected to generate 0.1 times more return on investment than GainClients. However, McDonalds is 10.42 times less risky than GainClients. It trades about 0.05 of its potential returns per unit of risk. GainClients is currently generating about -0.13 per unit of risk. If you would invest 29,060 in McDonalds on September 12, 2024 and sell it today you would earn a total of 1,011 from holding McDonalds or generate 3.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
McDonalds vs. GainClients
Performance |
Timeline |
McDonalds |
GainClients |
McDonalds and GainClients Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with McDonalds and GainClients
The main advantage of trading using opposite McDonalds and GainClients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, GainClients 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 GainClients will offset losses from the drop in GainClients' long position.McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
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Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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