Correlation Between McDonalds and AVVAA World

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

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

Diversification Opportunities for McDonalds and AVVAA World

-0.32

Correlation Coefficient

McDonalds  AVVAA World

Very good diversification

The 3 months correlation between McDonalds and AVVAA is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and AVVAA World Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVVAA World Health 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 AVVAA World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVVAA World Health has no effect on the direction of McDonalds i.e., McDonalds and AVVAA World go up and down completely randomly.

Pair Corralation between McDonalds and AVVAA World

Considering the 90-day investment horizon McDonalds is expected to generate 0.12 times more return on investment than AVVAA World. However, McDonalds is 8.27 times less risky than AVVAA World. It trades about -0.02 of its potential returns per unit of risk. AVVAA World Health is currently generating about -0.01 per unit of risk. If you would invest  29,905  in McDonalds on September 5, 2024 and sell it today you would lose (396.00) from holding McDonalds or give up 1.32% of portfolio value over 90 days.

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

McDonalds  vs.  AVVAA World Health

McDonalds

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

AVVAA World Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVVAA World Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with McDonalds and AVVAA World

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

The idea behind McDonalds and AVVAA World Health 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.