Correlation Between McDonalds and BANNER

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

By analyzing existing cross correlation between McDonalds and BANNER 2907 01 JAN 42, you can compare the effects of market volatilities on McDonalds and BANNER 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 BANNER. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and BANNER.

Diversification Opportunities for McDonalds and BANNER

-0.4

Correlation Coefficient

McDonalds  BANNER

Very good diversification

The 3 months correlation between McDonalds and BANNER is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and BANNER 2907 01 JAN 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANNER 2907 01 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 BANNER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANNER 2907 01 has no effect on the direction of McDonalds i.e., McDonalds and BANNER go up and down completely randomly.

Pair Corralation between McDonalds and BANNER

Considering the 90-day investment horizon McDonalds is expected to generate 1.18 times more return on investment than BANNER. However, McDonalds is 1.18 times more volatile than BANNER 2907 01 JAN 42. It trades about 0.01 of its potential returns per unit of risk. BANNER 2907 01 JAN 42 is currently generating about -0.21 per unit of risk. If you would invest  29,476  in McDonalds on September 13, 2024 and sell it today you would earn a total of  187.00  from holding McDonalds or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	31.25%
Values	Daily Returns

McDonalds  vs.  BANNER 2907 01 JAN 42

McDonalds

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 1 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

BANNER 2907 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANNER 2907 01 JAN 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for BANNER 2907 01 JAN 42 investors.

Pair Trading with McDonalds and BANNER

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

The idea behind McDonalds and BANNER 2907 01 JAN 42 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.