Correlation Between JetBlue Airways and McDonalds
Can any of the company-specific risk be diversified away by investing in both JetBlue Airways and McDonalds 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 JetBlue Airways and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JetBlue Airways Corp and McDonalds, you can compare the effects of market volatilities on JetBlue Airways and McDonalds 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 JetBlue Airways with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of JetBlue Airways and McDonalds.
Diversification Opportunities for JetBlue Airways and McDonalds
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JetBlue and McDonalds is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding JetBlue Airways Corp and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and JetBlue Airways 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 JetBlue Airways Corp are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of JetBlue Airways i.e., JetBlue Airways and McDonalds go up and down completely randomly.
Pair Corralation between JetBlue Airways and McDonalds
Given the investment horizon of 90 days JetBlue Airways Corp is expected to under-perform the McDonalds. In addition to that, JetBlue Airways is 3.44 times more volatile than McDonalds. It trades about -0.02 of its total potential returns per unit of risk. McDonalds is currently generating about 0.03 per unit of volatility. If you would invest 23,805 in McDonalds on January 25, 2024 and sell it today you would earn a total of 3,810 from holding McDonalds or generate 16.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JetBlue Airways Corp vs. McDonalds
Performance |
| Timeline |
| JetBlue Airways Corp |
| McDonalds |
JetBlue Airways and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JetBlue Airways and McDonalds
The main advantage of trading using opposite JetBlue Airways and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JetBlue Airways position performs unexpectedly, McDonalds 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 McDonalds will offset losses from the drop in McDonalds' long position.| JetBlue Airways vs. Frontier Group Holdings | JetBlue Airways vs. Southwest Airlines | JetBlue Airways vs. United Airlines Holdings | JetBlue Airways vs. American Airlines Group |
| McDonalds vs. Dominos Pizza | McDonalds vs. The Wendys Co | McDonalds vs. Wingstop | McDonalds vs. Yum China Holdings |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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