Correlation Between Restaurant Brands and Yum China
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands and Yum China 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 Restaurant Brands and Yum China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Yum China Holdings, you can compare the effects of market volatilities on Restaurant Brands and Yum China 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 Restaurant Brands with a short position of Yum China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Yum China.
Diversification Opportunities for Restaurant Brands and Yum China
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Restaurant and Yum is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Yum China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum China Holdings and Restaurant Brands 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 Restaurant Brands International are associated (or correlated) with Yum China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum China Holdings has no effect on the direction of Restaurant Brands i.e., Restaurant Brands and Yum China go up and down completely randomly.
Pair Corralation between Restaurant Brands and Yum China
Assuming the 90 days horizon Restaurant Brands International is expected to generate 0.52 times more return on investment than Yum China. However, Restaurant Brands International is 1.93 times less risky than Yum China. It trades about -0.23 of its potential returns per unit of risk. Yum China Holdings is currently generating about -0.29 per unit of risk. If you would invest 6,448 in Restaurant Brands International on October 10, 2024 and sell it today you would lose (322.00) from holding Restaurant Brands International or give up 4.99% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Restaurant Brands Internationa vs. Yum China Holdings
Performance |
Timeline |
Restaurant Brands |
Yum China Holdings |
Restaurant Brands and Yum China Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Restaurant Brands and Yum China
The main advantage of trading using opposite Restaurant Brands and Yum China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands position performs unexpectedly, Yum China 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 Yum China will offset losses from the drop in Yum China's long position.Restaurant Brands vs. Superior Plus Corp | Restaurant Brands vs. NMI Holdings | Restaurant Brands vs. SIVERS SEMICONDUCTORS AB | Restaurant Brands vs. Talanx AG |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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