Correlation Between McDonalds and L Catterton

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

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

Diversification Opportunities for McDonalds and L Catterton

-0.4

Correlation Coefficient

McDonalds  L Catterton

Very good diversification

The 3 months correlation between McDonalds and LCAAU is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia 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 L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of McDonalds i.e., McDonalds and L Catterton go up and down completely randomly.

Pair Corralation between McDonalds and L Catterton

If you would invest  25,731  in McDonalds on September 22, 2024 and sell it today you would earn a total of  3,537  from holding McDonalds or generate 13.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.79%
Values	Daily Returns

McDonalds  vs.  L Catterton Asia

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.

L Catterton Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L Catterton Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, L Catterton is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with McDonalds and L Catterton

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

The idea behind McDonalds and L Catterton Asia 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.