Correlation Between Dover and McDonalds
Can any of the company-specific risk be diversified away by investing in both Dover 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 Dover and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dover and McDonalds, you can compare the effects of market volatilities on Dover 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 Dover with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dover and McDonalds.
Diversification Opportunities for Dover and McDonalds
Excellent diversification
The 3 months correlation between Dover and McDonalds is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dover and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Dover 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 Dover 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 Dover i.e., Dover and McDonalds go up and down completely randomly.
Pair Corralation between Dover and McDonalds
Considering the 90-day investment horizon Dover is expected to under-perform the McDonalds. In addition to that, Dover is 1.03 times more volatile than McDonalds. It trades about -0.1 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 26, 2024 and sell it today you would lose (187.00) from holding McDonalds or give up 0.67% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Dover vs. McDonalds
Performance |
Timeline |
Dover |
McDonalds |
Dover and McDonalds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Dover and McDonalds
The main advantage of trading using opposite Dover and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dover 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.Dover vs. Parker Hannifin | Dover vs. Emerson Electric | Dover vs. Smith AO | Dover vs. Watts Water Technologies |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
Content Syndication Quickly integrate customizable finance content to your own investment portal | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Fundamental Analysis View fundamental data based on most recent published financial statements | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
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 |