Correlation Between McDonalds and 882508BM5

Can any of the company-specific risk be diversified away by investing in both McDonalds and 882508BM5 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 882508BM5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between McDonalds and TXN 27 15 SEP 51, you can compare the effects of market volatilities on McDonalds and 882508BM5 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 882508BM5. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and 882508BM5.

Diversification Opportunities for McDonalds and 882508BM5

0.03

Correlation Coefficient

McDonalds  882508BM5

Significant diversification

The 3 months correlation between McDonalds and 882508BM5 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and TXN 27 15 SEP 51 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TXN 27 15 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 882508BM5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TXN 27 15 has no effect on the direction of McDonalds i.e., McDonalds and 882508BM5 go up and down completely randomly.

Pair Corralation between McDonalds and 882508BM5

Considering the 90-day investment horizon McDonalds is expected to generate 0.68 times more return on investment than 882508BM5. However, McDonalds is 1.48 times less risky than 882508BM5. It trades about 0.09 of its potential returns per unit of risk. TXN 27 15 SEP 51 is currently generating about -0.05 per unit of risk. If you would invest  29,244  in McDonalds on November 30, 2024 and sell it today you would earn a total of  1,591  from holding McDonalds or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.33%
Values	Daily Returns

McDonalds  vs.  TXN 27 15 SEP 51

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.

TXN 27 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days TXN 27 15 SEP 51 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 882508BM5 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with McDonalds and 882508BM5

The main advantage of trading using opposite McDonalds and 882508BM5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, 882508BM5 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 882508BM5 will offset losses from the drop in 882508BM5's long position.

The idea behind McDonalds and TXN 27 15 SEP 51 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.