Correlation Between McDonalds and 718549AD0

Can any of the company-specific risk be diversified away by investing in both McDonalds and 718549AD0 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 718549AD0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between McDonalds and Phillips 66 Partners, you can compare the effects of market volatilities on McDonalds and 718549AD0 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 718549AD0. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and 718549AD0.

Diversification Opportunities for McDonalds and 718549AD0

0.04

Correlation Coefficient

McDonalds  718549AD0

Significant diversification

The 3 months correlation between McDonalds and 718549AD0 is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Phillips 66 Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 Partners 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 718549AD0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 Partners has no effect on the direction of McDonalds i.e., McDonalds and 718549AD0 go up and down completely randomly.

Pair Corralation between McDonalds and 718549AD0

Considering the 90-day investment horizon McDonalds is expected to generate 0.44 times more return on investment than 718549AD0. However, McDonalds is 2.26 times less risky than 718549AD0. It trades about -0.08 of its potential returns per unit of risk. Phillips 66 Partners is currently generating about -0.09 per unit of risk. If you would invest  29,678  in McDonalds on October 23, 2024 and sell it today you would lose (1,417) from holding McDonalds or give up 4.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.93%
Values	Daily Returns

McDonalds  vs.  Phillips 66 Partners

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.

Phillips 66 Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phillips 66 Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 Phillips 66 Partners investors.

Pair Trading with McDonalds and 718549AD0

The main advantage of trading using opposite McDonalds and 718549AD0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, 718549AD0 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 718549AD0 will offset losses from the drop in 718549AD0's long position.

The idea behind McDonalds and Phillips 66 Partners 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.