Correlation Between McDonalds Corp and American Beacon

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

Diversification Opportunities for McDonalds Corp and American Beacon

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between McDonalds and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp and American Beacon Mid-Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Mid-Cap and McDonalds Corp 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 Corp are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Mid-Cap has no effect on the direction of McDonalds Corp i.e., McDonalds Corp and American Beacon go up and down completely randomly.

Pair Corralation between McDonalds Corp and American Beacon

Considering the 90-day investment horizon McDonalds Corp is expected to generate 0.39 times more return on investment than American Beacon. However, McDonalds Corp is 2.55 times less risky than American Beacon. It trades about 0.03 of its potential returns per unit of risk. American Beacon Mid-Cap is currently generating about 0.0 per unit of risk. If you would invest  24,793  in McDonalds Corp on August 31, 2022 and sell it today you would earn a total of  2,348  from holding McDonalds Corp or generate 9.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy97.77%
ValuesDaily Returns

McDonalds Corp  vs.  American Beacon Mid-Cap

 Performance (%) 
       Timeline  
McDonalds Corp 
McDonalds Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, McDonalds Corp may actually be approaching a critical reversion point that can send shares even higher in December 2022.

McDonalds Price Channel

American Beacon Mid-Cap 
American Performance
0 of 100
Over the last 90 days American Beacon Mid-Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, American Beacon may actually be approaching a critical reversion point that can send shares even higher in December 2022.

McDonalds Corp and American Beacon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds Corp and American Beacon

The main advantage of trading using opposite McDonalds Corp and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.
McDonalds Corp vs. World Wrestling Entertainment
The idea behind McDonalds Corp and American Beacon Mid-Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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