Correlation Between McDonalds and Fidelity Growth

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

By analyzing existing cross correlation between McDonalds and Fidelity Growth Opportunities, you can compare the effects of market volatilities on McDonalds and Fidelity Growth 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 Fidelity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Fidelity Growth.

Diversification Opportunities for McDonalds and Fidelity Growth

-0.87

Correlation Coefficient

McDonalds  Fidelity Growth

Pay attention - limited upside

The 3 months correlation between McDonalds and Fidelity is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Fidelity Growth Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Growth Oppo 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 Fidelity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Growth Oppo has no effect on the direction of McDonalds i.e., McDonalds and Fidelity Growth go up and down completely randomly.

Pair Corralation between McDonalds and Fidelity Growth

Considering the 90-day investment horizon McDonalds is expected to generate 6.11 times less return on investment than Fidelity Growth. But when comparing it to its historical volatility, McDonalds is 1.3 times less risky than Fidelity Growth. It trades about 0.03 of its potential returns per unit of risk. Fidelity Growth Opportunities is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,393  in Fidelity Growth Opportunities on January 24, 2024 and sell it today you would earn a total of  714.00  from holding Fidelity Growth Opportunities or generate 51.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	86.21%
Values	Daily Returns

McDonalds  vs.  Fidelity Growth Opportunities

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 latest fragile performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Fidelity Growth Oppo

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Fidelity Growth Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very fragile basic indicators, Fidelity Growth displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds and Fidelity Growth

The main advantage of trading using opposite McDonalds and Fidelity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Fidelity Growth 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 Fidelity Growth will offset losses from the drop in Fidelity Growth's long position.

The idea behind McDonalds and Fidelity Growth Opportunities 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.