Correlation Between McDonalds and Ag Growth

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

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

Diversification Opportunities for McDonalds and Ag Growth

-0.33

Correlation Coefficient

McDonalds  Ag Growth

Very good diversification

The 3 months correlation between McDonalds and AGGZF is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Ag Growth International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ag Growth International 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 Ag Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ag Growth International has no effect on the direction of McDonalds i.e., McDonalds and Ag Growth go up and down completely randomly.

Pair Corralation between McDonalds and Ag Growth

Considering the 90-day investment horizon McDonalds is expected to generate 0.57 times more return on investment than Ag Growth. However, McDonalds is 1.76 times less risky than Ag Growth. It trades about 0.02 of its potential returns per unit of risk. Ag Growth International is currently generating about 0.0 per unit of risk. If you would invest  26,439  in McDonalds on February 6, 2024 and sell it today you would earn a total of  629.00  from holding McDonalds or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

McDonalds  vs.  Ag Growth International

McDonalds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McDonalds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ag Growth International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ag Growth International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with McDonalds and Ag Growth

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

The idea behind McDonalds and Ag Growth International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.