Correlation Between McDonalds and IndexIQ

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

Diversification Opportunities for McDonalds and IndexIQ

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between McDonalds and IndexIQ is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of McDonalds i.e., McDonalds and IndexIQ go up and down completely randomly.

Pair Corralation between McDonalds and IndexIQ

If you would invest  29,231  in McDonalds on November 30, 2023 and sell it today you would earn a total of  145.00  from holding McDonalds or generate 0.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

McDonalds  vs.  IndexIQ

 Performance 
       Timeline  
McDonalds 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
IndexIQ 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in March 2024. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

McDonalds and IndexIQ Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds and IndexIQ

The main advantage of trading using opposite McDonalds and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, IndexIQ 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 IndexIQ will offset losses from the drop in IndexIQ's long position.
The idea behind McDonalds and IndexIQ 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.
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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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