Correlation Between McDonalds Corp and Boston Omaha

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

Diversification Opportunities for McDonalds Corp and Boston Omaha

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between McDonalds and Boston is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds Corp and Boston Omaha Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Omaha Corp 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 Boston Omaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Omaha Corp has no effect on the direction of McDonalds Corp i.e., McDonalds Corp and Boston Omaha go up and down completely randomly.

Pair Corralation between McDonalds Corp and Boston Omaha

Considering the 90-day investment horizon McDonalds Corp is expected to generate 1.26 times less return on investment than Boston Omaha. But when comparing it to its historical volatility, McDonalds Corp is 2.77 times less risky than Boston Omaha. It trades about 0.06 of its potential returns per unit of risk. Boston Omaha Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,283  in Boston Omaha Corp on August 31, 2022 and sell it today you would earn a total of  484.00  from holding Boston Omaha Corp or generate 21.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

McDonalds Corp  vs.  Boston Omaha Corp

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

McDonalds Price Channel

Boston Omaha Corp 
Boston Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Boston Omaha Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Boston Omaha is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Price Channel

McDonalds Corp and Boston Omaha Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds Corp and Boston Omaha

The main advantage of trading using opposite McDonalds Corp and Boston Omaha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, Boston Omaha 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 Boston Omaha will offset losses from the drop in Boston Omaha's long position.
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The idea behind McDonalds Corp and Boston Omaha 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.
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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