Correlation Between McDonalds and HOCHSCHILD MINING

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

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

Diversification Opportunities for McDonalds and HOCHSCHILD MINING

-0.24

Correlation Coefficient

McDonalds  HOCHSCHILD MINING

Very good diversification

The 3 months correlation between McDonalds and HOCHSCHILD is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and HOCHSCHILD MINING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOCHSCHILD MINING 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 HOCHSCHILD MINING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOCHSCHILD MINING has no effect on the direction of McDonalds i.e., McDonalds and HOCHSCHILD MINING go up and down completely randomly.

Pair Corralation between McDonalds and HOCHSCHILD MINING

Assuming the 90 days horizon McDonalds is expected to generate 0.32 times more return on investment than HOCHSCHILD MINING. However, McDonalds is 3.16 times less risky than HOCHSCHILD MINING. It trades about 0.01 of its potential returns per unit of risk. HOCHSCHILD MINING is currently generating about -0.05 per unit of risk. If you would invest  26,913  in McDonalds on October 25, 2024 and sell it today you would earn a total of  92.00  from holding McDonalds or generate 0.34% return on investment over 90 days.

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

McDonalds  vs.  HOCHSCHILD MINING

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. Despite nearly stable basic indicators, McDonalds is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HOCHSCHILD MINING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOCHSCHILD MINING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with McDonalds and HOCHSCHILD MINING

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

The idea behind McDonalds and HOCHSCHILD MINING 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.