Correlation Between McDonalds and Simplify Volatility

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

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

Diversification Opportunities for McDonalds and Simplify Volatility

-0.29

Correlation Coefficient

McDonalds  Simplify Volatility

Very good diversification

The 3 months correlation between McDonalds and Simplify is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding McDonalds and Simplify Volatility Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Volatility 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 Simplify Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Volatility has no effect on the direction of McDonalds i.e., McDonalds and Simplify Volatility go up and down completely randomly.

Pair Corralation between McDonalds and Simplify Volatility

Considering the 90-day investment horizon McDonalds is expected to generate 8.96 times less return on investment than Simplify Volatility. But when comparing it to its historical volatility, McDonalds is 3.03 times less risky than Simplify Volatility. It trades about 0.12 of its potential returns per unit of risk. Simplify Volatility Premium is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,525  in Simplify Volatility Premium on February 15, 2025 and sell it today you would earn a total of  473.00  from holding Simplify Volatility Premium or generate 31.02% return on investment over 90 days.

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

McDonalds  vs.  Simplify Volatility Premium

McDonalds

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McDonalds are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Simplify Volatility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Volatility Premium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Simplify Volatility is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with McDonalds and Simplify Volatility

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

The idea behind McDonalds and Simplify Volatility Premium 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.