Correlation Between McDonalds and Mayfair Gold

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

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

Diversification Opportunities for McDonalds and Mayfair Gold

0.35

Correlation Coefficient

McDonalds  Mayfair Gold

Weak diversification

The 3 months correlation between McDonalds and Mayfair is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Mayfair Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mayfair Gold Corp 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 Mayfair Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mayfair Gold Corp has no effect on the direction of McDonalds i.e., McDonalds and Mayfair Gold go up and down completely randomly.

Pair Corralation between McDonalds and Mayfair Gold

Considering the 90-day investment horizon McDonalds is expected to generate 0.4 times more return on investment than Mayfair Gold. However, McDonalds is 2.51 times less risky than Mayfair Gold. It trades about 0.11 of its potential returns per unit of risk. Mayfair Gold Corp is currently generating about -0.01 per unit of risk. If you would invest  28,899  in McDonalds on November 19, 2024 and sell it today you would earn a total of  1,956  from holding McDonalds or generate 6.77% return on investment over 90 days.

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

McDonalds  vs.  Mayfair Gold Corp

McDonalds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Mayfair Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mayfair Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Mayfair Gold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with McDonalds and Mayfair Gold

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

The idea behind McDonalds and Mayfair Gold Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.