Correlation Between McDonalds and Aerojet Rocketdyne

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

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

Diversification Opportunities for McDonalds and Aerojet Rocketdyne

-0.71

Correlation Coefficient

McDonalds  Aerojet Rocketdyne

Pay attention - limited upside

The 3 months correlation between McDonalds and Aerojet is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne 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 Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of McDonalds i.e., McDonalds and Aerojet Rocketdyne go up and down completely randomly.

Pair Corralation between McDonalds and Aerojet Rocketdyne

If you would invest  5,622  in Aerojet Rocketdyne Holdings on August 13, 2024 and sell it today you would earn a total of  0.00  from holding Aerojet Rocketdyne Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

McDonalds  vs.  Aerojet Rocketdyne Holdings

McDonalds

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, McDonalds may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Aerojet Rocketdyne

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with McDonalds and Aerojet Rocketdyne

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

The idea behind McDonalds and Aerojet Rocketdyne 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.