Correlation Between McDonalds and SUMIBK

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

By analyzing existing cross correlation between McDonalds and SUMIBK 293 17 SEP 41, you can compare the effects of market volatilities on McDonalds and SUMIBK 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 SUMIBK. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and SUMIBK.

Diversification Opportunities for McDonalds and SUMIBK

-0.26

Correlation Coefficient

McDonalds  SUMIBK

Very good diversification

The 3 months correlation between McDonalds and SUMIBK is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and SUMIBK 293 17 SEP 41 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMIBK 293 17 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 SUMIBK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMIBK 293 17 has no effect on the direction of McDonalds i.e., McDonalds and SUMIBK go up and down completely randomly.

Pair Corralation between McDonalds and SUMIBK

Considering the 90-day investment horizon McDonalds is expected to generate 1.27 times more return on investment than SUMIBK. However, McDonalds is 1.27 times more volatile than SUMIBK 293 17 SEP 41. It trades about 0.08 of its potential returns per unit of risk. SUMIBK 293 17 SEP 41 is currently generating about -0.05 per unit of risk. If you would invest  29,244  in McDonalds on December 2, 2024 and sell it today you would earn a total of  1,589  from holding McDonalds or generate 5.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.46%
Values	Daily Returns

McDonalds  vs.  SUMIBK 293 17 SEP 41

McDonalds

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 6 (%) 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.

SUMIBK 293 17

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUMIBK 293 17 SEP 41 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SUMIBK 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 SUMIBK

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

The idea behind McDonalds and SUMIBK 293 17 SEP 41 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.