Correlation Between McDonalds Corp and Vanguard Total

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

Diversification Opportunities for McDonalds Corp and Vanguard Total

0.84
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between McDonalds Corp and Vanguard Total

Considering the 90-day investment horizon McDonalds Corp is expected to under-perform the Vanguard Total. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds Corp is 1.27 times less risky than Vanguard Total. The stock trades about -0.34 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  19,021  in Vanguard Total Stock on July 2, 2022 and sell it today you would lose (1,220)  from holding Vanguard Total Stock or give up 6.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

McDonalds Corp  vs.  Vanguard Total Stock

 Performance (%) 
       Timeline  
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 latest conflicting performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

McDonalds Price Channel

Vanguard Total Stock 
Vanguard Performance
0 of 100
Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Price Channel

McDonalds Corp and Vanguard Total Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McDonalds Corp and Vanguard Total

The main advantage of trading using opposite McDonalds Corp and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds Corp position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total's long position.
McDonalds Corp vs. Amazon Inc
The idea behind McDonalds Corp and Vanguard Total Stock 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.
Vanguard Total vs. Walt Disney
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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