Correlation Between McDonalds Holdings and Jollibee Foods

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

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

Diversification Opportunities for McDonalds Holdings and Jollibee Foods

0.14

Correlation Coefficient

McDonalds Holdings  Jollibee Foods

Average diversification

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

Pair Corralation between McDonalds Holdings and Jollibee Foods

Assuming the 90 days horizon McDonalds Holdings is expected to under-perform the Jollibee Foods. But the pink sheet apears to be less risky and, when comparing its historical volatility, McDonalds Holdings is 1.82 times less risky than Jollibee Foods. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Jollibee Foods Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Jollibee Foods Corp on September 13, 2024 and sell it today you would earn a total of  274.00  from holding Jollibee Foods Corp or generate 16.12% return on investment over 90 days.

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

McDonalds Holdings  vs.  Jollibee Foods Corp

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.

Jollibee Foods Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jollibee Foods Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Jollibee Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds Holdings and Jollibee Foods

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

The idea behind McDonalds Holdings and Jollibee Foods Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.