Correlation Between McDonalds and Cypress Development

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

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

Diversification Opportunities for McDonalds and Cypress Development

-0.52

Correlation Coefficient

McDonalds  Cypress Development

Excellent diversification

The 3 months correlation between McDonalds and Cypress is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Cypress Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cypress Development Corp 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 Cypress Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cypress Development Corp has no effect on the direction of McDonalds i.e., McDonalds and Cypress Development go up and down completely randomly.

Pair Corralation between McDonalds and Cypress Development

Considering the 90-day investment horizon McDonalds is expected to generate 0.08 times more return on investment than Cypress Development. However, McDonalds is 12.26 times less risky than Cypress Development. It trades about -0.04 of its potential returns per unit of risk. Cypress Development Corp is currently generating about -0.26 per unit of risk. If you would invest  27,554  in McDonalds on February 3, 2024 and sell it today you would lose (226.00) from holding McDonalds or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

McDonalds  vs.  Cypress Development Corp

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

Cypress Development Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cypress Development Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cypress Development reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds and Cypress Development

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

The idea behind McDonalds and Cypress Development 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.