Correlation Between McDonalds and 456837AW3

Can any of the company-specific risk be diversified away by investing in both McDonalds and 456837AW3 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 456837AW3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between McDonalds and ING GROEP NV, you can compare the effects of market volatilities on McDonalds and 456837AW3 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 456837AW3. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and 456837AW3.

Diversification Opportunities for McDonalds and 456837AW3

0.61

Correlation Coefficient

McDonalds  456837AW3

Poor diversification

The 3 months correlation between McDonalds and 456837AW3 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and ING GROEP NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ING GROEP NV 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 456837AW3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ING GROEP NV has no effect on the direction of McDonalds i.e., McDonalds and 456837AW3 go up and down completely randomly.

Pair Corralation between McDonalds and 456837AW3

Considering the 90-day investment horizon McDonalds is expected to generate 3.15 times more return on investment than 456837AW3. However, McDonalds is 3.15 times more volatile than ING GROEP NV. It trades about 0.03 of its potential returns per unit of risk. ING GROEP NV is currently generating about -0.16 per unit of risk. If you would invest  29,209  in McDonalds on September 19, 2024 and sell it today you would earn a total of  399.00  from holding McDonalds or generate 1.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	82.54%
Values	Daily Returns

McDonalds  vs.  ING GROEP NV

McDonalds

Risk-Adjusted Performance

1 of 100

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

ING GROEP NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ING GROEP NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 456837AW3 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 456837AW3

The main advantage of trading using opposite McDonalds and 456837AW3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, 456837AW3 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 456837AW3 will offset losses from the drop in 456837AW3's long position.

The idea behind McDonalds and ING GROEP NV 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.