Correlation Between McDonalds and Cathay Financial

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

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

Diversification Opportunities for McDonalds and Cathay Financial

0.0

Correlation Coefficient

McDonalds  Cathay Financial

Pay attention - limited upside

The 3 months correlation between McDonalds and Cathay is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Cathay Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Financial Holding 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 Cathay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Financial Holding has no effect on the direction of McDonalds i.e., McDonalds and Cathay Financial go up and down completely randomly.

Pair Corralation between McDonalds and Cathay Financial

If you would invest  0.00  in Cathay Financial Holding on February 1, 2024 and sell it today you would earn a total of  0.00  from holding Cathay Financial Holding or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

McDonalds  vs.  Cathay Financial Holding

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.

Cathay Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cathay Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with McDonalds and Cathay Financial

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

The idea behind McDonalds and Cathay Financial Holding 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.