Correlation Between XRP and McDonalds

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

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

Diversification Opportunities for XRP and McDonalds

-0.55

Correlation Coefficient

XRP  McDonalds

Excellent diversification

The 3 months correlation between XRP and McDonalds is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding XRP and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and XRP 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 XRP 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 XRP i.e., XRP and McDonalds go up and down completely randomly.

Pair Corralation between XRP and McDonalds

Assuming the 90 days trading horizon XRP is expected to generate 3.7 times more return on investment than McDonalds. However, XRP is 3.7 times more volatile than McDonalds. It trades about 0.03 of its potential returns per unit of risk. McDonalds is currently generating about -0.03 per unit of risk. If you would invest  232.00  in XRP on December 23, 2024 and sell it today you would earn a total of  4.00  from holding XRP or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.31%
Values	Daily Returns

XRP  vs.  McDonalds

XRP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XRP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, XRP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

McDonalds

Risk-Adjusted Performance

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 XRP and McDonalds

The main advantage of trading using opposite XRP and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XRP 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 XRP 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.