Correlation Between McDonalds and Everi Holdings

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

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

Diversification Opportunities for McDonalds and Everi Holdings

0.69

Correlation Coefficient

McDonalds  Everi Holdings

Poor diversification

The 3 months correlation between McDonalds and Everi is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Everi Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everi 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 Everi Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everi Holdings has no effect on the direction of McDonalds i.e., McDonalds and Everi Holdings go up and down completely randomly.

Pair Corralation between McDonalds and Everi Holdings

Considering the 90-day investment horizon McDonalds is expected to generate 6.04 times less return on investment than Everi Holdings. But when comparing it to its historical volatility, McDonalds is 3.29 times less risky than Everi Holdings. It trades about 0.07 of its potential returns per unit of risk. Everi Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  752.00  in Everi Holdings on August 14, 2024 and sell it today you would earn a total of  583.00  from holding Everi Holdings or generate 77.53% return on investment over 90 days.

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

McDonalds  vs.  Everi 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.

Everi Holdings

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Everi Holdings are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Everi Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with McDonalds and Everi Holdings

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

The idea behind McDonalds and Everi 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.