Correlation Between McDonalds and Amada

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Can any of the company-specific risk be diversified away by investing in both McDonalds and Amada 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 Amada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Amada Co, you can compare the effects of market volatilities on McDonalds and Amada 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 Amada. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Amada.

Diversification Opportunities for McDonalds and Amada

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between McDonalds and Amada is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Amada Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amada 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 Amada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amada has no effect on the direction of McDonalds i.e., McDonalds and Amada go up and down completely randomly.

Pair Corralation between McDonalds and Amada

If you would invest  26,669  in McDonalds on February 5, 2024 and sell it today you would earn a total of  363.00  from holding McDonalds or generate 1.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

McDonalds  vs.  Amada Co

 Performance 
       Timeline  
McDonalds 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 current stock price tumult, may contribute to shorter-term losses for the shareholders.
Amada 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Amada may actually be approaching a critical reversion point that can send shares even higher in June 2024.

McDonalds and Amada Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds and Amada

The main advantage of trading using opposite McDonalds and Amada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Amada 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 Amada will offset losses from the drop in Amada's long position.
The idea behind McDonalds and Amada Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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