Correlation Between Papa Johns and McDonalds

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Papa Johns 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 Papa Johns and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Papa Johns International and McDonalds, you can compare the effects of market volatilities on Papa Johns 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 Papa Johns with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Papa Johns and McDonalds.

Diversification Opportunities for Papa Johns and McDonalds

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Papa and McDonalds is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Papa Johns International and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Papa Johns 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 Papa Johns International 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 Papa Johns i.e., Papa Johns and McDonalds go up and down completely randomly.

Pair Corralation between Papa Johns and McDonalds

Given the investment horizon of 90 days Papa Johns International is expected to under-perform the McDonalds. In addition to that, Papa Johns is 1.94 times more volatile than McDonalds. It trades about -0.43 of its total potential returns per unit of risk. McDonalds is currently generating about -0.27 per unit of volatility. If you would invest  28,445  in McDonalds on January 20, 2024 and sell it today you would lose (1,347) from holding McDonalds or give up 4.74% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

Papa Johns International  vs.  McDonalds

 Performance 
       Timeline  
Papa Johns International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
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 latest fragile performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Papa Johns and McDonalds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Papa Johns and McDonalds

The main advantage of trading using opposite Papa Johns and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papa Johns 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.
The idea behind Papa Johns International and McDonalds 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

Other Complementary Tools

Positions Ratings
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
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Share Portfolio
Track or share privately all of your investments from the convenience of any device
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
FinTech Suite
Use AI to screen and filter profitable investment opportunities
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets