Correlation Between McDonalds Corp and Build-A-Bear Workshop

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both McDonalds Corp and Build-A-Bear Workshop 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 Build-A-Bear Workshop into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McDonalds Corp and Build-A-Bear Workshop, you can compare the effects of market volatilities on McDonalds Corp and Build-A-Bear Workshop 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 Build-A-Bear Workshop. Check out your portfolio center. Please also check ongoing floating volatility patterns of McDonalds Corp and Build-A-Bear Workshop.

Diversification Opportunities for McDonalds Corp and Build-A-Bear Workshop

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between McDonalds and Build-A-Bear is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp and Build-A-Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build-A-Bear Workshop 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 Build-A-Bear Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build-A-Bear Workshop has no effect on the direction of McDonalds Corp i.e., McDonalds Corp and Build-A-Bear Workshop go up and down completely randomly.

Pair Corralation between McDonalds Corp and Build-A-Bear Workshop

Considering the 90-day investment horizon McDonalds Corp is expected to generate 33.22 times less return on investment than Build-A-Bear Workshop. But when comparing it to its historical volatility, McDonalds Corp is 3.34 times less risky than Build-A-Bear Workshop. It trades about 0.01 of its potential returns per unit of risk. Build-A-Bear Workshop is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,751  in Build-A-Bear Workshop on August 29, 2022 and sell it today you would earn a total of  132.00  from holding Build-A-Bear Workshop or generate 7.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

McDonalds Corp  vs.  Build-A-Bear Workshop

 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 unfluctuating fundamental indicators, McDonalds Corp may actually be approaching a critical reversion point that can send shares even higher in December 2022.

McDonalds Price Channel

Build-A-Bear Workshop 
Build-A-Bear Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Build-A-Bear Workshop are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Build-A-Bear Workshop showed solid returns over the last few months and may actually be approaching a breakup point.

Build-A-Bear Price Channel

McDonalds Corp and Build-A-Bear Workshop Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds Corp and Build-A-Bear Workshop

The main advantage of trading using opposite McDonalds Corp and Build-A-Bear Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, Build-A-Bear Workshop 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 Build-A-Bear Workshop will offset losses from the drop in Build-A-Bear Workshop's long position.
McDonalds Corp vs. Blockbuster
The idea behind McDonalds Corp and Build-A-Bear Workshop 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.
Build-A-Bear Workshop vs. Ulta Beauty
Build-A-Bear Workshop vs. Best Buy Company
Build-A-Bear Workshop vs. Tractor Supply
Build-A-Bear Workshop vs. Genuine Parts
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

Other Complementary Tools

Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go