Correlation Between McDonalds Corp and Long Term

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

Diversification Opportunities for McDonalds Corp and Long Term

  Correlation Coefficient

Good diversification

The 3 months correlation between McDonalds and Long Term is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp and Long Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term Bond 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 Long Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term Bond has no effect on the direction of McDonalds Corp i.e., McDonalds Corp and Long Term go up and down completely randomly.

Pair Corralation between McDonalds Corp and Long Term

Considering the 90-day investment horizon McDonalds Corp is expected to generate 1.28 times more return on investment than Long Term. However, McDonalds Corp is 1.28 times more volatile than Long Term Bond. It trades about 0.06 of its potential returns per unit of risk. Long Term Bond is currently generating about -0.07 per unit of risk. If you would invest  20,039  in McDonalds Corp on August 30, 2022 and sell it today you would earn a total of  7,461  from holding McDonalds Corp or generate 37.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

McDonalds Corp  vs.  Long Term Bond

 Performance (%) 
McDonalds Corp 
McDonalds Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds Corp are ranked lower than 8 (%) 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

Long Term Bond 
Long Term Performance
0 of 100
Over the last 90 days Long Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Long Term is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Long Term Price Channel

McDonalds Corp and Long Term Volatility Contrast

   Predicted Return Density   

Pair Trading with McDonalds Corp and Long Term

The main advantage of trading using opposite McDonalds Corp and Long Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, Long Term 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 Long Term will offset losses from the drop in Long Term's long position.
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The idea behind McDonalds Corp and Long Term Bond 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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