Correlation Between McDonalds and Barclays PLC
Can any of the company-specific risk be diversified away by investing in both McDonalds and Barclays PLC 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 McDonalds and Barclays PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Barclays PLC ADR, you can compare the effects of market volatilities on McDonalds and Barclays PLC 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 McDonalds with a short position of Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Barclays PLC.
Diversification Opportunities for McDonalds and Barclays PLC
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between McDonalds and Barclays is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR and McDonalds 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 McDonalds are associated (or correlated) with Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of McDonalds i.e., McDonalds and Barclays PLC go up and down completely randomly.
Pair Corralation between McDonalds and Barclays PLC
Considering the 90-day investment horizon McDonalds is expected to under-perform the Barclays PLC. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds is 1.2 times less risky than Barclays PLC. The stock trades about -0.14 of its potential returns per unit of risk. The Barclays PLC ADR is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 830.00 in Barclays PLC ADR on December 29, 2023 and sell it today you would earn a total of 112.00 from holding Barclays PLC ADR or generate 13.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
McDonalds vs. Barclays PLC ADR
Performance |
Timeline |
McDonalds |
Barclays PLC ADR |
McDonalds and Barclays PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with McDonalds and Barclays PLC
The main advantage of trading using opposite McDonalds and Barclays PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Barclays PLC 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 Barclays PLC will offset losses from the drop in Barclays PLC's long position.McDonalds vs. Pool Corporation | McDonalds vs. Calliditas Therapeutics | McDonalds vs. RadNet Inc | McDonalds vs. Olympic Steel |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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