Correlation Between British Amer and McDonalds
Can any of the company-specific risk be diversified away by investing in both British Amer 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 British Amer and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and McDonalds, you can compare the effects of market volatilities on British Amer 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 British Amer with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and McDonalds.
Diversification Opportunities for British Amer and McDonalds
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between British and McDonalds is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and British Amer 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 British American Tobacco 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 British Amer i.e., British Amer and McDonalds go up and down completely randomly.
Pair Corralation between British Amer and McDonalds
Considering the 90-day investment horizon British American Tobacco is expected to under-perform the McDonalds. In addition to that, British Amer is 1.1 times more volatile than McDonalds. It trades about -0.08 of its total potential returns per unit of risk. McDonalds is currently generating about -0.03 per unit of volatility. If you would invest 27,862 in McDonalds on January 25, 2024 and sell it today you would lose (174.00) from holding McDonalds or give up 0.62% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
British American Tobacco vs. McDonalds
Performance |
Timeline |
British American Tobacco |
McDonalds |
British Amer and McDonalds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with British Amer and McDonalds
The main advantage of trading using opposite British Amer and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer 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.British Amer vs. Hempacco Co | British Amer vs. Green Globe International | British Amer vs. Imperial Brands PLC | British Amer vs. Kaival Brands Innovations |
McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Commodity Directory Find actively traded commodities issued by global exchanges | |
Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |