Correlation Between McDonalds and Agritek Holdings

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

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

Diversification Opportunities for McDonalds and Agritek Holdings

0.0

Correlation Coefficient

McDonalds  Agritek Holdings

Pay attention - limited upside

The 3 months correlation between McDonalds and Agritek is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Agritek Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritek Holdings and McDonalds 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 are associated (or correlated) with Agritek Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritek Holdings has no effect on the direction of McDonalds i.e., McDonalds and Agritek Holdings go up and down completely randomly.

Pair Corralation between McDonalds and Agritek Holdings

If you would invest  27,507  in McDonalds on August 2, 2024 and sell it today you would earn a total of  1,645  from holding McDonalds or generate 5.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

McDonalds  vs.  Agritek Holdings

McDonalds

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Agritek Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agritek Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Agritek Holdings is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with McDonalds and Agritek Holdings

The main advantage of trading using opposite McDonalds and Agritek Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McDonalds position performs unexpectedly, Agritek Holdings 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 Agritek Holdings will offset losses from the drop in Agritek Holdings' long position.

The idea behind McDonalds and Agritek Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.