Correlation Between McDonalds and 126650DK3

Can any of the company-specific risk be diversified away by investing in both McDonalds and 126650DK3 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 126650DK3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between McDonalds and CVS HEALTH P, you can compare the effects of market volatilities on McDonalds and 126650DK3 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 126650DK3. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and 126650DK3.

Diversification Opportunities for McDonalds and 126650DK3

-0.45

Correlation Coefficient

McDonalds  126650DK3

Very good diversification

The 3 months correlation between McDonalds and 126650DK3 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and CVS HEALTH P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH P 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 126650DK3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH P has no effect on the direction of McDonalds i.e., McDonalds and 126650DK3 go up and down completely randomly.

Pair Corralation between McDonalds and 126650DK3

Considering the 90-day investment horizon McDonalds is expected to generate 1.23 times more return on investment than 126650DK3. However, McDonalds is 1.23 times more volatile than CVS HEALTH P. It trades about 0.06 of its potential returns per unit of risk. CVS HEALTH P is currently generating about -0.02 per unit of risk. If you would invest  28,552  in McDonalds on September 2, 2024 and sell it today you would earn a total of  1,049  from holding McDonalds or generate 3.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

McDonalds  vs.  CVS HEALTH P

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

CVS HEALTH P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 126650DK3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with McDonalds and 126650DK3

The main advantage of trading using opposite McDonalds and 126650DK3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, 126650DK3 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 126650DK3 will offset losses from the drop in 126650DK3's long position.

The idea behind McDonalds and CVS HEALTH P 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.