Correlation Between McDonalds and CSWI Old

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

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

Diversification Opportunities for McDonalds and CSWI Old

0.01

Correlation Coefficient

McDonalds  CSWI Old

Significant diversification

The 3 months correlation between McDonalds and CSWI is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and CSWI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSWI Old 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 CSWI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSWI Old has no effect on the direction of McDonalds i.e., McDonalds and CSWI Old go up and down completely randomly.

Pair Corralation between McDonalds and CSWI Old

Considering the 90-day investment horizon McDonalds is expected to generate 0.84 times more return on investment than CSWI Old. However, McDonalds is 1.19 times less risky than CSWI Old. It trades about 0.01 of its potential returns per unit of risk. CSWI Old is currently generating about -0.23 per unit of risk. If you would invest  31,317  in McDonalds on May 27, 2025 and sell it today you would earn a total of  90.00  from holding McDonalds or generate 0.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	15.87%
Values	Daily Returns

McDonalds  vs.  CSWI Old

McDonalds

Risk-Adjusted Performance

Weakest

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CSWI Old

Risk-Adjusted Performance

Weakest

Over the last 90 days CSWI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in September 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with McDonalds and CSWI Old

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

The idea behind McDonalds and CSWI Old 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .