Correlation Between McDonalds Holdings and Bloomin Brands

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

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

Diversification Opportunities for McDonalds Holdings and Bloomin Brands

0.7

Correlation Coefficient

McDonalds Holdings  Bloomin Brands

Poor diversification

The 3 months correlation between McDonalds and Bloomin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Holdings and Bloomin Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bloomin Brands and McDonalds 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 McDonalds Holdings are associated (or correlated) with Bloomin Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bloomin Brands has no effect on the direction of McDonalds Holdings i.e., McDonalds Holdings and Bloomin Brands go up and down completely randomly.

Pair Corralation between McDonalds Holdings and Bloomin Brands

Assuming the 90 days horizon McDonalds Holdings is expected to generate 0.39 times more return on investment than Bloomin Brands. However, McDonalds Holdings is 2.54 times less risky than Bloomin Brands. It trades about -0.13 of its potential returns per unit of risk. Bloomin Brands is currently generating about -0.06 per unit of risk. If you would invest  4,380  in McDonalds Holdings on September 12, 2024 and sell it today you would lose (480.00) from holding McDonalds Holdings or give up 10.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

McDonalds Holdings  vs.  Bloomin Brands

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.

Bloomin Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with McDonalds Holdings and Bloomin Brands

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

The idea behind McDonalds Holdings and Bloomin Brands 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.