Correlation Between One Choice and McDonalds Corp

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

Diversification Opportunities for One Choice and McDonalds Corp

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between AAAHX and McDonalds is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding One Choice Blend and McDonalds Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp and One Choice 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 One Choice Blend are associated (or correlated) with McDonalds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Corp has no effect on the direction of One Choice i.e., One Choice and McDonalds Corp go up and down completely randomly.

Pair Corralation between One Choice and McDonalds Corp

Assuming the 90 days horizon One Choice Blend is expected to under-perform the McDonalds Corp. But the mutual fund apears to be less risky and, when comparing its historical volatility, One Choice Blend is 2.14 times less risky than McDonalds Corp. The mutual fund trades about -0.02 of its potential returns per unit of risk. The McDonalds Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19,939  in McDonalds Corp on May 9, 2022 and sell it today you would earn a total of  5,984  from holding McDonalds Corp or generate 30.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy71.54%
ValuesDaily Returns

One Choice Blend  vs.  McDonalds Corp

 Performance (%) 
       Timeline  
One Choice Blend 
AAAHX Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in One Choice Blend are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, One Choice is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AAAHX Price Channel

McDonalds Corp 
McDonalds Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, McDonalds Corp is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

McDonalds Price Channel

One Choice and McDonalds Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with One Choice and McDonalds Corp

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

One Choice Blend

Pair trading matchups for One Choice

The idea behind One Choice Blend and McDonalds Corp 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.
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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