Correlation Between McDonalds and Vior

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

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

Diversification Opportunities for McDonalds and Vior

0.46

Correlation Coefficient

McDonalds  Vior

Very weak diversification

The 3 months correlation between McDonalds and Vior is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Vior Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vior Inc 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 Vior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vior Inc has no effect on the direction of McDonalds i.e., McDonalds and Vior go up and down completely randomly.

Pair Corralation between McDonalds and Vior

Considering the 90-day investment horizon McDonalds is expected to generate 16.07 times less return on investment than Vior. But when comparing it to its historical volatility, McDonalds is 7.83 times less risky than Vior. It trades about 0.06 of its potential returns per unit of risk. Vior Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Vior Inc on September 2, 2024 and sell it today you would earn a total of  4.50  from holding Vior Inc or generate 52.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

McDonalds  vs.  Vior Inc

McDonalds

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 4 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vior Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vior Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vior reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds and Vior

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

The idea behind McDonalds and Vior Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.