Correlation Between Aramark Holdings and McDonalds Corp

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

Diversification Opportunities for Aramark Holdings and McDonalds Corp

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Aramark and McDonalds is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aramark Holdings Corp and McDonalds Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp and Aramark Holdings 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 Aramark Holdings Corp 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 Aramark Holdings i.e., Aramark Holdings and McDonalds Corp go up and down completely randomly.

Pair Corralation between Aramark Holdings and McDonalds Corp

Given the investment horizon of 90 days Aramark Holdings Corp is expected to generate 1.77 times more return on investment than McDonalds Corp. However, Aramark Holdings is 1.77 times more volatile than McDonalds Corp. It trades about -0.11 of its potential returns per unit of risk. McDonalds Corp is currently generating about -0.2 per unit of risk. If you would invest  3,517  in Aramark Holdings Corp on July 6, 2022 and sell it today you would lose (317.00)  from holding Aramark Holdings Corp or give up 9.01% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Aramark Holdings Corp  vs.  McDonalds Corp

 Performance (%) 
       Timeline  
Aramark Holdings Corp 
Aramark Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Aramark Holdings Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Aramark Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Aramark Price Channel

McDonalds Corp 
McDonalds Performance
0 of 100
Over the last 90 days McDonalds Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, McDonalds Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

McDonalds Price Channel

Aramark Holdings and McDonalds Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aramark Holdings and McDonalds Corp

The main advantage of trading using opposite Aramark Holdings and McDonalds Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aramark Holdings 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.
Aramark Holdings vs. Amazon Inc
The idea behind Aramark Holdings Corp 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.
McDonalds Corp vs. Amazon Inc
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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