Correlation Between Chuys Holdings and McDonalds Holdings

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

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

Diversification Opportunities for Chuys Holdings and McDonalds Holdings

-0.14

Correlation Coefficient

Chuys Holdings  McDonalds Holdings

Good diversification

The 3 months correlation between Chuys and McDonalds is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Chuys Holdings and McDonalds Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Holdings and Chuys Holdings 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 Chuys Holdings are associated (or correlated) with McDonalds Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Holdings has no effect on the direction of Chuys Holdings i.e., Chuys Holdings and McDonalds Holdings go up and down completely randomly.

Pair Corralation between Chuys Holdings and McDonalds Holdings

Given the investment horizon of 90 days Chuys Holdings is expected to generate 3.11 times more return on investment than McDonalds Holdings. However, Chuys Holdings is 3.11 times more volatile than McDonalds Holdings. It trades about 0.02 of its potential returns per unit of risk. McDonalds Holdings is currently generating about 0.0 per unit of risk. If you would invest  3,712  in Chuys Holdings on September 12, 2024 and sell it today you would earn a total of  36.00  from holding Chuys Holdings or generate 0.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.4%
Values	Daily Returns

Chuys Holdings  vs.  McDonalds Holdings

Chuys Holdings

Risk-Adjusted Performance

0 of 100

Solid

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

McDonalds Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McDonalds Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Chuys Holdings and McDonalds Holdings

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

The idea behind Chuys Holdings and McDonalds Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.