Correlation Between AB VIRGINIA and McDonalds

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Can any of the company-specific risk be diversified away by investing in both AB VIRGINIA 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 AB VIRGINIA and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB VIRGINIA PORTFOLIO and McDonalds, you can compare the effects of market volatilities on AB VIRGINIA 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 AB VIRGINIA with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB VIRGINIA and McDonalds.

Diversification Opportunities for AB VIRGINIA and McDonalds

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between AVAAX and McDonalds is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AB VIRGINIA PORTFOLIO and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and AB VIRGINIA 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 AB VIRGINIA PORTFOLIO 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 AB VIRGINIA i.e., AB VIRGINIA and McDonalds go up and down completely randomly.

Pair Corralation between AB VIRGINIA and McDonalds

Assuming the 90 days horizon AB VIRGINIA PORTFOLIO is expected to under-perform the McDonalds. But the mutual fund apears to be less risky and, when comparing its historical volatility, AB VIRGINIA PORTFOLIO is 5.42 times less risky than McDonalds. The mutual fund trades about -0.07 of its potential returns per unit of risk. The McDonalds is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19,866  in McDonalds on September 2, 2022 and sell it today you would earn a total of  7,413  from holding McDonalds or generate 37.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

AB VIRGINIA PORTFOLIO  vs.  McDonalds

 Performance (%) 
       Timeline  
AB VIRGINIA PORTFOLIO 
AVAAX Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AB VIRGINIA PORTFOLIO are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, AB VIRGINIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

AVAAX Price Channel

McDonalds 
McDonalds Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in January 2023.

McDonalds Price Channel

AB VIRGINIA and McDonalds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AB VIRGINIA and McDonalds

The main advantage of trading using opposite AB VIRGINIA and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB VIRGINIA 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.
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The idea behind AB VIRGINIA PORTFOLIO and McDonalds 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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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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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