Correlation Between McDonalds and Radisson Mining

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

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

Diversification Opportunities for McDonalds and Radisson Mining

0.12

Correlation Coefficient

McDonalds  Radisson Mining

Average diversification

The 3 months correlation between McDonalds and Radisson is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Radisson Mining Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radisson Mining Resources 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 Radisson Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radisson Mining Resources has no effect on the direction of McDonalds i.e., McDonalds and Radisson Mining go up and down completely randomly.

Pair Corralation between McDonalds and Radisson Mining

Considering the 90-day investment horizon McDonalds is expected to generate 12.62 times less return on investment than Radisson Mining. But when comparing it to its historical volatility, McDonalds is 6.35 times less risky than Radisson Mining. It trades about 0.06 of its potential returns per unit of risk. Radisson Mining Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Radisson Mining Resources on November 28, 2024 and sell it today you would earn a total of  7.00  from holding Radisson Mining Resources or generate 41.18% return on investment over 90 days.

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

McDonalds  vs.  Radisson Mining Resources

McDonalds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 4 (%) 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.

Radisson Mining Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radisson Mining Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Radisson Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds and Radisson Mining

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

The idea behind McDonalds and Radisson Mining Resources 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.