Correlation Between McDonalds and Blucora

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

Diversification Opportunities for McDonalds and Blucora

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between McDonalds and Blucora is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Blucora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blucora and McDonalds 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 are associated (or correlated) with Blucora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blucora has no effect on the direction of McDonalds i.e., McDonalds and Blucora go up and down completely randomly.

Pair Corralation between McDonalds and Blucora

Considering the 90-day investment horizon McDonalds is expected to under-perform the Blucora. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds is 2.09 times less risky than Blucora. The stock trades about -0.07 of its potential returns per unit of risk. The Blucora is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,345  in Blucora on September 6, 2022 and sell it today you would earn a total of  66.00  from holding Blucora or generate 2.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

McDonalds  vs.  Blucora

 Performance (%) 
       Timeline  
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 sluggish fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in January 2023.

McDonalds Price Channel

Blucora 
Blucora Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Blucora are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Blucora reported solid returns over the last few months and may actually be approaching a breakup point.

Blucora Price Channel

McDonalds and Blucora Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds and Blucora

The main advantage of trading using opposite McDonalds and Blucora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Blucora 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 Blucora will offset losses from the drop in Blucora's long position.
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The idea behind McDonalds and Blucora 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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