Correlation Between Income Fund and McDonalds
Can any of the company-specific risk be diversified away by investing in both Income Fund and McDonalds 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 Income Fund and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and McDonalds, you can compare the effects of market volatilities on Income Fund and McDonalds 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 Income Fund with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and McDonalds.
Diversification Opportunities for Income Fund and McDonalds
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Income and McDonalds is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Income Fund 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 Income Fund Of are associated (or correlated) with McDonalds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McDonalds has no effect on the direction of Income Fund i.e., Income Fund and McDonalds go up and down completely randomly.
Pair Corralation between Income Fund and McDonalds
Assuming the 90 days horizon Income Fund Of is expected to generate 0.55 times more return on investment than McDonalds. However, Income Fund Of is 1.82 times less risky than McDonalds. It trades about -0.28 of its potential returns per unit of risk. McDonalds is currently generating about -0.23 per unit of risk. If you would invest 2,413 in Income Fund Of on January 21, 2024 and sell it today you would lose (70.00) from holding Income Fund Of or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Income Fund Of vs. McDonalds
Performance |
| Timeline |
| Income Fund |
| McDonalds |
Income Fund and McDonalds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and McDonalds
The main advantage of trading using opposite Income Fund and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund position performs unexpectedly, McDonalds 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 will offset losses from the drop in McDonalds' long position.| Income Fund vs. New World Fund | Income Fund vs. American Mutual Fund | Income Fund vs. American Mutual Fund | Income Fund vs. American Funds Income |
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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 the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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