Correlation Between McDonalds and Tinybeans Group

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

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

Diversification Opportunities for McDonalds and Tinybeans Group

0.63

Correlation Coefficient

McDonalds  Tinybeans Group

Poor diversification

The 3 months correlation between McDonalds and Tinybeans is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Tinybeans Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tinybeans Group 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 Tinybeans Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tinybeans Group has no effect on the direction of McDonalds i.e., McDonalds and Tinybeans Group go up and down completely randomly.

Pair Corralation between McDonalds and Tinybeans Group

Considering the 90-day investment horizon McDonalds is expected to generate 26.37 times less return on investment than Tinybeans Group. But when comparing it to its historical volatility, McDonalds is 25.09 times less risky than Tinybeans Group. It trades about 0.04 of its potential returns per unit of risk. Tinybeans Group Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Tinybeans Group Limited on September 12, 2024 and sell it today you would lose (15.50) from holding Tinybeans Group Limited or give up 96.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.7%
Values	Daily Returns

McDonalds  vs.  Tinybeans Group Limited

McDonalds

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 4 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tinybeans Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tinybeans Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tinybeans Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds and Tinybeans Group

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

The idea behind McDonalds and Tinybeans Group Limited 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 CEOs Directory module to screen CEOs from public companies around the world.