Correlation Between Giant and McDonalds

Can any of the company-specific risk be diversified away by investing in both Giant 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 Giant and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Giant Group and McDonalds, you can compare the effects of market volatilities on Giant 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 Giant with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Giant and McDonalds.

Diversification Opportunities for Giant and McDonalds

0.0

Correlation Coefficient

Giant  McDonalds

Pay attention - limited upside

The 3 months correlation between Giant and McDonalds is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Giant Group and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Giant 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 Giant Group 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 Giant i.e., Giant and McDonalds go up and down completely randomly.

Pair Corralation between Giant and McDonalds

If you would invest  20,000  in Giant Group on January 25, 2024 and sell it today you would earn a total of  0.00  from holding Giant Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Giant Group  vs.  McDonalds

Giant Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Giant Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Giant is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

McDonalds

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Giant and McDonalds

The main advantage of trading using opposite Giant and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Giant 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 Giant Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.