Correlation Between China XD and McDonalds
Can any of the company-specific risk be diversified away by investing in both China XD 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 China XD and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China XD Plastics and McDonalds, you can compare the effects of market volatilities on China XD 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 China XD with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of China XD and McDonalds.
Diversification Opportunities for China XD and McDonalds
Very good diversification
The 3 months correlation between China and McDonalds is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China XD Plastics and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and China XD 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 China XD Plastics 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 China XD i.e., China XD and McDonalds go up and down completely randomly.
Pair Corralation between China XD and McDonalds
If you would invest 0.24 in China XD Plastics on January 25, 2024 and sell it today you would earn a total of 0.00 from holding China XD Plastics or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
China XD Plastics vs. McDonalds
Performance |
| Timeline |
| China XD Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| McDonalds |
China XD and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China XD and McDonalds
The main advantage of trading using opposite China XD and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China XD 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.| China XD vs. First Watch Restaurant | China XD vs. The Wendys Co | China XD vs. nLIGHT Inc | China XD vs. Yum Brands |
| McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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