Correlation Between McDonalds and PACIFIC

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

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

Diversification Opportunities for McDonalds and PACIFIC

-0.49

Correlation Coefficient

McDonalds  PACIFIC

Very good diversification

The 3 months correlation between McDonalds and PACIFIC is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and PACIFIC GAS AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC GAS AND 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 PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC GAS AND has no effect on the direction of McDonalds i.e., McDonalds and PACIFIC go up and down completely randomly.

Pair Corralation between McDonalds and PACIFIC

Considering the 90-day investment horizon McDonalds is expected to generate 0.83 times more return on investment than PACIFIC. However, McDonalds is 1.21 times less risky than PACIFIC. It trades about 0.03 of its potential returns per unit of risk. PACIFIC GAS AND is currently generating about -0.16 per unit of risk. If you would invest  29,224  in McDonalds on October 7, 2024 and sell it today you would earn a total of  254.00  from holding McDonalds or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.37%
Values	Daily Returns

McDonalds  vs.  PACIFIC GAS AND

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.

PACIFIC GAS AND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PACIFIC GAS AND has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 PACIFIC GAS AND investors.

Pair Trading with McDonalds and PACIFIC

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

The idea behind McDonalds and PACIFIC GAS AND 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.