Correlation Between McDonalds and Orea Mining

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

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

Diversification Opportunities for McDonalds and Orea Mining

0.56

Correlation Coefficient

McDonalds  Orea Mining

Very weak diversification

The 3 months correlation between McDonalds and Orea is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Orea Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orea Mining Corp 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 Orea Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orea Mining Corp has no effect on the direction of McDonalds i.e., McDonalds and Orea Mining go up and down completely randomly.

Pair Corralation between McDonalds and Orea Mining

Considering the 90-day investment horizon McDonalds is expected to under-perform the Orea Mining. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds is 265.66 times less risky than Orea Mining. The stock trades about -0.24 of its potential returns per unit of risk. The Orea Mining Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Orea Mining Corp on January 20, 2024 and sell it today you would lose (0.10) from holding Orea Mining Corp or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

McDonalds  vs.  Orea Mining Corp

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.

Orea Mining Corp

Risk-Adjusted Performance

8 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orea Mining Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Orea Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McDonalds and Orea Mining

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

The idea behind McDonalds and Orea Mining Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.