Correlation Between McDonalds and XXL Energy

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

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

Diversification Opportunities for McDonalds and XXL Energy

-0.46

Correlation Coefficient

McDonalds  XXL Energy

Very good diversification

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

Pair Corralation between McDonalds and XXL Energy

Considering the 90-day investment horizon McDonalds is expected to generate 0.09 times more return on investment than XXL Energy. However, McDonalds is 11.31 times less risky than XXL Energy. It trades about 0.04 of its potential returns per unit of risk. XXL Energy Corp is currently generating about -0.12 per unit of risk. If you would invest  28,631  in McDonalds on September 4, 2024 and sell it today you would earn a total of  613.00  from holding McDonalds or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

McDonalds  vs.  XXL Energy Corp

McDonalds

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 2 (%) 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.

XXL Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XXL Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with McDonalds and XXL Energy

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

The idea behind McDonalds and XXL Energy Corp 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .