diversifiable risk of combining McDonalds and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and First Trust Multi Asset, you can compare the effects of market volatilities on McDonalds and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and First Trust.
Diversification Opportunities for McDonalds and First Trust
Pair Corralation between McDonalds and First Trust
Considering the 90-day investment horizon McDonalds is expected to under-perform the First Trust. In addition to that, McDonalds is 2.04 times more volatile than First Trust Multi Asset. It trades about -0.09 of its total potential returns per unit of risk. First Trust Multi Asset is currently generating about 0.01 per unit of volatility. If you would invest 1,545 in First Trust Multi Asset on November 24, 2023 and sell it today you would earn a total of 1.00 from holding First Trust Multi Asset or generate 0.06% return on investment over 90 days.
McDonalds vs. First Trust Multi-Asset
McDonalds and First Trust Volatility Contrast
Pair Trading with McDonalds and First TrustThe main advantage of trading using opposite McDonalds and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position. The idea behind McDonalds and First Trust Multi Asset 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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