Correlation Between Starbucks Corp and McDonalds Corp

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

Diversification Opportunities for Starbucks Corp and McDonalds Corp

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Starbucks and McDonalds is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Starbucks Corp and McDonalds Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds Corp and Starbucks 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 Starbucks Corp are associated (or correlated) with McDonalds Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds Corp has no effect on the direction of Starbucks Corp i.e., Starbucks Corp and McDonalds Corp go up and down completely randomly.

Pair Corralation between Starbucks Corp and McDonalds Corp

Given the investment horizon of 90 days Starbucks Corp is expected to generate 2.51 times less return on investment than McDonalds Corp. In addition to that, Starbucks Corp is 1.66 times more volatile than McDonalds Corp. It trades about 0.0 of its total potential returns per unit of risk. McDonalds Corp is currently generating about 0.02 per unit of volatility. If you would invest  21,853  in McDonalds Corp on July 2, 2022 and sell it today you would earn a total of  1,372  from holding McDonalds Corp or generate 6.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Starbucks Corp  vs.  McDonalds Corp

 Performance (%) 
       Timeline  
Starbucks Corp 
Starbucks Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Starbucks Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Starbucks Corp may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Starbucks Price Channel

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

Starbucks Corp and McDonalds Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Starbucks Corp and McDonalds Corp

The main advantage of trading using opposite Starbucks Corp and McDonalds Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Starbucks Corp position performs unexpectedly, McDonalds Corp 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 McDonalds Corp will offset losses from the drop in McDonalds Corp's long position.
Starbucks Corp vs. Amazon Inc
The idea behind Starbucks Corp and McDonalds 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.
McDonalds Corp vs. Amazon Inc
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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