Correlation Between Primaris Retail and McDonalds Corp

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

By analyzing existing cross correlation between Primaris Retail RE and McDonalds Corp CDR, you can compare the effects of market volatilities on Primaris Retail and McDonalds Corp 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 Primaris Retail with a short position of McDonalds Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primaris Retail and McDonalds Corp.

Diversification Opportunities for Primaris Retail and McDonalds Corp

0.18

Correlation Coefficient

Primaris Retail  McDonalds Corp

Average diversification

The 3 months correlation between Primaris and McDonalds is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Primaris Retail RE and McDonalds Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp CDR and Primaris Retail 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 Primaris Retail RE are associated (or correlated) with McDonalds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Corp CDR has no effect on the direction of Primaris Retail i.e., Primaris Retail and McDonalds Corp go up and down completely randomly.

Pair Corralation between Primaris Retail and McDonalds Corp

Assuming the 90 days trading horizon Primaris Retail RE is expected to under-perform the McDonalds Corp. In addition to that, Primaris Retail is 1.98 times more volatile than McDonalds Corp CDR. It trades about -0.14 of its total potential returns per unit of risk. McDonalds Corp CDR is currently generating about -0.22 per unit of volatility. If you would invest  2,639  in McDonalds Corp CDR on October 9, 2024 and sell it today you would lose (85.00) from holding McDonalds Corp CDR or give up 3.22% of portfolio value over 90 days.

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

Primaris Retail RE  vs.  McDonalds Corp CDR

Primaris Retail RE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primaris Retail RE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Primaris Retail is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

McDonalds Corp CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McDonalds Corp CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, McDonalds Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Primaris Retail and McDonalds Corp

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

The idea behind Primaris Retail RE and McDonalds Corp CDR 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.