Correlation Between McDonalds and Goldman Sachs

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

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

Diversification Opportunities for McDonalds and Goldman Sachs

0.66

Correlation Coefficient

McDonalds  Goldman Sachs

Poor diversification

The 3 months correlation between McDonalds and Goldman is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Goldman Sachs Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Inflation 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Inflation has no effect on the direction of McDonalds i.e., McDonalds and Goldman Sachs go up and down completely randomly.

Pair Corralation between McDonalds and Goldman Sachs

Considering the 90-day investment horizon McDonalds is expected to generate 3.05 times more return on investment than Goldman Sachs. However, McDonalds is 3.05 times more volatile than Goldman Sachs Inflation. It trades about 0.03 of its potential returns per unit of risk. Goldman Sachs Inflation is currently generating about 0.03 per unit of risk. If you would invest  26,935  in McDonalds on December 22, 2024 and sell it today you would earn a total of  3,609  from holding McDonalds or generate 13.4% return on investment over 90 days.

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

McDonalds  vs.  Goldman Sachs Inflation

McDonalds

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Goldman Sachs Inflation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Inflation are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with McDonalds and Goldman Sachs

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

The idea behind McDonalds and Goldman Sachs Inflation 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.