Correlation Between SentinelOne and McDonalds

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

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

Diversification Opportunities for SentinelOne and McDonalds

0.77

Correlation Coefficient

SentinelOne  McDonalds

Poor diversification

The 3 months correlation between SentinelOne and McDonalds is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and SentinelOne 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 SentinelOne 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 SentinelOne i.e., SentinelOne and McDonalds go up and down completely randomly.

Pair Corralation between SentinelOne and McDonalds

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the McDonalds. In addition to that, SentinelOne is 2.7 times more volatile than McDonalds. It trades about -0.05 of its total potential returns per unit of risk. McDonalds is currently generating about -0.03 per unit of volatility. If you would invest  27,862  in McDonalds on January 26, 2024 and sell it today you would lose (187.00) from holding McDonalds or give up 0.67% of portfolio value over 90 days.

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

SentinelOne  vs.  McDonalds

SentinelOne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SentinelOne and McDonalds

The main advantage of trading using opposite SentinelOne and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne 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 SentinelOne 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.