Correlation Between Dupont De and McDonalds

Can any of the company-specific risk be diversified away by investing in both Dupont De 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 Dupont De and McDonalds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and McDonalds, you can compare the effects of market volatilities on Dupont De 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 Dupont De with a short position of McDonalds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and McDonalds.

Diversification Opportunities for Dupont De and McDonalds

0.52

Correlation Coefficient

Dupont De  McDonalds

Very weak diversification

The 3 months correlation between Dupont and McDonalds is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and McDonalds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McDonalds and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and McDonalds go up and down completely randomly.

Pair Corralation between Dupont De and McDonalds

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the McDonalds. In addition to that, Dupont De is 1.09 times more volatile than McDonalds. It trades about -0.18 of its total potential returns per unit of risk. McDonalds is currently generating about -0.03 per unit of volatility. If you would invest  30,187  in McDonalds on September 27, 2024 and sell it today you would lose (788.00) from holding McDonalds or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dupont De Nemours  vs.  McDonalds

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

McDonalds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McDonalds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, McDonalds is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dupont De and McDonalds

The main advantage of trading using opposite Dupont De and McDonalds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.

The idea behind Dupont De Nemours and McDonalds 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.