Correlation Between McDonalds and Franklin Templeton

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

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

Diversification Opportunities for McDonalds and Franklin Templeton

0.62

Correlation Coefficient

McDonalds  Franklin Templeton

Poor diversification

The 3 months correlation between McDonalds and Franklin is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF 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 Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of McDonalds i.e., McDonalds and Franklin Templeton go up and down completely randomly.

Pair Corralation between McDonalds and Franklin Templeton

Considering the 90-day investment horizon McDonalds is expected to generate 1.01 times more return on investment than Franklin Templeton. However, McDonalds is 1.01 times more volatile than Franklin Templeton ETF. It trades about 0.12 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about -0.05 per unit of risk. If you would invest  28,675  in McDonalds on September 22, 2024 and sell it today you would earn a total of  593.00  from holding McDonalds or generate 2.07% return on investment over 90 days.

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

McDonalds  vs.  Franklin Templeton ETF

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.

Franklin Templeton ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Templeton ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Franklin Templeton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with McDonalds and Franklin Templeton

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

The idea behind McDonalds and Franklin Templeton ETF 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.