Correlation Between McDonalds and KINDER

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

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

Diversification Opportunities for McDonalds and KINDER

-0.45

Correlation Coefficient

McDonalds  KINDER

Very good diversification

The 3 months correlation between McDonalds and KINDER is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of McDonalds i.e., McDonalds and KINDER go up and down completely randomly.

Pair Corralation between McDonalds and KINDER

Considering the 90-day investment horizon McDonalds is expected to generate 0.7 times more return on investment than KINDER. However, McDonalds is 1.43 times less risky than KINDER. It trades about -0.11 of its potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.27 per unit of risk. If you would invest  29,509  in McDonalds on October 5, 2024 and sell it today you would lose (520.00) from holding McDonalds or give up 1.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.0%
Values	Daily Returns

McDonalds  vs.  KINDER MORGAN ENERGY

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.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with McDonalds and KINDER

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

The idea behind McDonalds and KINDER MORGAN ENERGY 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.