Correlation Between McDonalds and Alsea SAB
Can any of the company-specific risk be diversified away by investing in both McDonalds and Alsea SAB 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 Alsea SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds and Alsea SAB de, you can compare the effects of market volatilities on McDonalds and Alsea SAB 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 Alsea SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds and Alsea SAB.
Diversification Opportunities for McDonalds and Alsea SAB
Modest diversification
The 3 months correlation between McDonalds and Alsea is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Alsea SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alsea SAB de 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 Alsea SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alsea SAB de has no effect on the direction of McDonalds i.e., McDonalds and Alsea SAB go up and down completely randomly.
Pair Corralation between McDonalds and Alsea SAB
Considering the 90-day investment horizon McDonalds is expected to generate 0.19 times more return on investment than Alsea SAB. However, McDonalds is 5.18 times less risky than Alsea SAB. It trades about -0.23 of its potential returns per unit of risk. Alsea SAB de is currently generating about -0.2 per unit of risk. If you would invest 27,323 in McDonalds on March 11, 2024 and sell it today you would lose (1,702) from holding McDonalds or give up 6.23% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
McDonalds vs. Alsea SAB de
Performance |
Timeline |
McDonalds |
Alsea SAB de |
McDonalds and Alsea SAB Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with McDonalds and Alsea SAB
The main advantage of trading using opposite McDonalds and Alsea SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Alsea SAB 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 Alsea SAB will offset losses from the drop in Alsea SAB's long position.McDonalds vs. Chipotle Mexican Grill | McDonalds vs. Dutch Bros | McDonalds vs. Dominos Pizza | McDonalds vs. Yum Brands |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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