Correlation Between Altisource Asset and McDonalds

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

Diversification Opportunities for Altisource Asset and McDonalds

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Altisource and McDonalds is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Altisource Asset Management and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Altisource Asset 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 Altisource Asset Management 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 Altisource Asset i.e., Altisource Asset and McDonalds go up and down completely randomly.

Pair Corralation between Altisource Asset and McDonalds

Given the investment horizon of 90 days Altisource Asset Management is expected to generate 4.59 times more return on investment than McDonalds. However, Altisource Asset is 4.59 times more volatile than McDonalds. It trades about 0.22 of its potential returns per unit of risk. McDonalds is currently generating about 0.03 per unit of risk. If you would invest  1,625  in Altisource Asset Management on September 2, 2022 and sell it today you would earn a total of  314.00  from holding Altisource Asset Management or generate 19.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Altisource Asset Management  vs.  McDonalds

 Performance (%) 
       Timeline  
Altisource Asset Man 
Altisource Performance
0 of 100
Over the last 90 days Altisource Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Altisource Asset is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Altisource 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

Altisource Asset and McDonalds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Altisource Asset and McDonalds

The main advantage of trading using opposite Altisource Asset and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altisource Asset 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 Altisource Asset Management 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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