Correlation Between Ameriprise Financial and McDonalds

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

Diversification Opportunities for Ameriprise Financial and McDonalds

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Ameriprise and McDonalds is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Ameriprise Financial 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 Ameriprise Financial 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 Ameriprise Financial i.e., Ameriprise Financial and McDonalds go up and down completely randomly.

Pair Corralation between Ameriprise Financial and McDonalds

Considering the 90-day investment horizon Ameriprise Financial is expected to generate 2.15 times more return on investment than McDonalds. However, Ameriprise Financial is 2.15 times more volatile than McDonalds. It trades about 0.2 of its potential returns per unit of risk. McDonalds is currently generating about 0.04 per unit of risk. If you would invest  30,787  in Ameriprise Financial on September 1, 2022 and sell it today you would earn a total of  2,408  from holding Ameriprise Financial or generate 7.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Ameriprise Financial  vs.  McDonalds

 Performance (%) 
       Timeline  
Ameriprise Financial 
Ameriprise Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Ameriprise Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Ameriprise Price Channel

McDonalds 
McDonalds Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 6 (%) 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 December 2022.

McDonalds Price Channel

Ameriprise Financial and McDonalds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ameriprise Financial and McDonalds

The main advantage of trading using opposite Ameriprise Financial and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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 Ameriprise Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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