Correlation Between T Mobile and McDonalds

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

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

Diversification Opportunities for T Mobile and McDonalds

0.31

Correlation Coefficient

T Mobile  McDonalds

Weak diversification

The 3 months correlation between T1MU34 and McDonalds is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and T Mobile 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 T Mobile are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of T Mobile i.e., T Mobile and McDonalds go up and down completely randomly.

Pair Corralation between T Mobile and McDonalds

Assuming the 90 days trading horizon T Mobile is expected to generate 0.98 times more return on investment than McDonalds. However, T Mobile is 1.02 times less risky than McDonalds. It trades about 0.17 of its potential returns per unit of risk. McDonalds is currently generating about 0.06 per unit of risk. If you would invest  39,781  in T Mobile on October 24, 2024 and sell it today you would earn a total of  26,336  from holding T Mobile or generate 66.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.17%
Values	Daily Returns

T Mobile  vs.  McDonalds

T Mobile

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, T Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 somewhat strong fundamental indicators, McDonalds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T Mobile and McDonalds

The main advantage of trading using opposite T Mobile and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Mobile position performs unexpectedly, McDonalds 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 will offset losses from the drop in McDonalds' long position.

The idea behind T Mobile and McDonalds 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.