Correlation Between McDonalds and Angel Oak

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

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

Diversification Opportunities for McDonalds and Angel Oak

-0.84

Correlation Coefficient

McDonalds  Angel Oak

Pay attention - limited upside

The 3 months correlation between McDonalds and Angel is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Angel Oak Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Financial 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 Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Financial has no effect on the direction of McDonalds i.e., McDonalds and Angel Oak go up and down completely randomly.

Pair Corralation between McDonalds and Angel Oak

Considering the 90-day investment horizon McDonalds is expected to under-perform the Angel Oak. In addition to that, McDonalds is 2.47 times more volatile than Angel Oak Financial. It trades about -0.11 of its total potential returns per unit of risk. Angel Oak Financial is currently generating about 0.18 per unit of volatility. If you would invest  1,200  in Angel Oak Financial on February 20, 2024 and sell it today you would earn a total of  52.00  from holding Angel Oak Financial or generate 4.33% return on investment over 90 days.

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

McDonalds  vs.  Angel Oak Financial

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.

Angel Oak Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Angel Oak Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Angel Oak 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 Angel Oak

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

The idea behind McDonalds and Angel Oak Financial 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.