Correlation Between McDonalds and Swiss Re

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

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

Diversification Opportunities for McDonalds and Swiss Re

0.5

Correlation Coefficient

McDonalds  Swiss Re

Very weak diversification

The 3 months correlation between McDonalds and Swiss is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Swiss Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re 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 Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re has no effect on the direction of McDonalds i.e., McDonalds and Swiss Re go up and down completely randomly.

Pair Corralation between McDonalds and Swiss Re

Considering the 90-day investment horizon McDonalds is expected to under-perform the Swiss Re. But the stock apears to be less risky and, when comparing its historical volatility, McDonalds is 1.25 times less risky than Swiss Re. The stock trades about -0.06 of its potential returns per unit of risk. The Swiss Re is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,616  in Swiss Re on May 7, 2025 and sell it today you would lose (32.00) from holding Swiss Re or give up 0.69% of portfolio value over 90 days.

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

McDonalds  vs.  Swiss Re

McDonalds

Risk-Adjusted Performance

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.

Swiss Re

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swiss Re has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Swiss Re is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with McDonalds and Swiss Re

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

The idea behind McDonalds and Swiss Re 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.