Correlation Between Marcus and McDonalds

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

By analyzing existing cross correlation between Marcus and McDonalds, you can compare the effects of market volatilities on Marcus and McDonalds 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 Marcus with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marcus and McDonalds.

Diversification Opportunities for Marcus and McDonalds

0.69

Correlation Coefficient

Marcus  McDonalds

Poor diversification

The 3 months correlation between Marcus and McDonalds is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Marcus and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Marcus 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 Marcus are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Marcus i.e., Marcus and McDonalds go up and down completely randomly.

Pair Corralation between Marcus and McDonalds

Considering the 90-day investment horizon Marcus is expected to under-perform the McDonalds. In addition to that, Marcus is 3.55 times more volatile than McDonalds. It trades about -0.37 of its total potential returns per unit of risk. McDonalds is currently generating about 0.05 per unit of volatility. If you would invest  26,756  in McDonalds on February 7, 2024 and sell it today you would earn a total of  174.00  from holding McDonalds or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Marcus  vs.  McDonalds

Marcus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marcus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Marcus and McDonalds

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

The idea behind Marcus and McDonalds 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.