Correlation Between McDonalds Holdings and Nathans Famous

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

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

Diversification Opportunities for McDonalds Holdings and Nathans Famous

-0.56

Correlation Coefficient

McDonalds Holdings  Nathans Famous

Excellent diversification

The 3 months correlation between McDonalds and Nathans is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Holdings and Nathans Famous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nathans Famous 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 Nathans Famous. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nathans Famous has no effect on the direction of McDonalds Holdings i.e., McDonalds Holdings and Nathans Famous go up and down completely randomly.

Pair Corralation between McDonalds Holdings and Nathans Famous

Assuming the 90 days horizon McDonalds Holdings is expected to under-perform the Nathans Famous. But the pink sheet apears to be less risky and, when comparing its historical volatility, McDonalds Holdings is 1.49 times less risky than Nathans Famous. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Nathans Famous is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,753  in Nathans Famous on September 13, 2024 and sell it today you would earn a total of  724.00  from holding Nathans Famous or generate 9.34% return on investment over 90 days.

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

McDonalds Holdings  vs.  Nathans Famous

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.

Nathans Famous

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nathans Famous are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Nathans Famous may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with McDonalds Holdings and Nathans Famous

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

The idea behind McDonalds Holdings and Nathans Famous 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.