Correlation Between McDonalds and Dutch Bros

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

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

Diversification Opportunities for McDonalds and Dutch Bros

-0.43

Correlation Coefficient

McDonalds  Dutch Bros

Very good diversification

The 3 months correlation between McDonalds and Dutch is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Dutch Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dutch Bros 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 Dutch Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dutch Bros has no effect on the direction of McDonalds i.e., McDonalds and Dutch Bros go up and down completely randomly.

Pair Corralation between McDonalds and Dutch Bros

Considering the 90-day investment horizon McDonalds is expected to generate 0.44 times more return on investment than Dutch Bros. However, McDonalds is 2.26 times less risky than Dutch Bros. It trades about -0.06 of its potential returns per unit of risk. Dutch Bros is currently generating about -0.39 per unit of risk. If you would invest  27,774  in McDonalds on February 2, 2024 and sell it today you would lose (331.00) from holding McDonalds or give up 1.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

McDonalds  vs.  Dutch Bros

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.

Dutch Bros

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dutch Bros are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dutch Bros is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with McDonalds and Dutch Bros

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

The idea behind McDonalds and Dutch Bros 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.