Correlation Between IShares Short and McDonalds
Can any of the company-specific risk be diversified away by investing in both IShares Short 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 IShares Short and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Short Maturity and McDonalds, you can compare the effects of market volatilities on IShares Short 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 IShares Short with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Short and McDonalds.
Diversification Opportunities for IShares Short and McDonalds
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and McDonalds is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and IShares Short 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 iShares Short Maturity 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 IShares Short i.e., IShares Short and McDonalds go up and down completely randomly.
Pair Corralation between IShares Short and McDonalds
Given the investment horizon of 90 days iShares Short Maturity is expected to generate 0.11 times more return on investment than McDonalds. However, iShares Short Maturity is 9.22 times less risky than McDonalds. It trades about 0.01 of its potential returns per unit of risk. McDonalds is currently generating about -0.07 per unit of risk. If you would invest 5,006 in iShares Short Maturity on January 26, 2024 and sell it today you would earn a total of 2.00 from holding iShares Short Maturity or generate 0.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.41% |
Values | Daily Returns |
iShares Short Maturity vs. McDonalds
Performance |
Timeline |
iShares Short Maturity |
McDonalds |
IShares Short and McDonalds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Short and McDonalds
The main advantage of trading using opposite IShares Short and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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.IShares Short vs. iShares ESG 1 5 | IShares Short vs. First Trust Low | IShares Short vs. First Trust Managed | IShares Short vs. First Trust Senior |
McDonalds vs. Imax Corp | McDonalds vs. Marcus | McDonalds vs. AMC Networks | McDonalds vs. Cinemark 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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