Correlation Between NAGOYA RAILROAD and Yum China

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

By analyzing existing cross correlation between NAGOYA RAILROAD and Yum China Holdings, you can compare the effects of market volatilities on NAGOYA RAILROAD 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 NAGOYA RAILROAD with a short position of Yum China. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAGOYA RAILROAD and Yum China.

Diversification Opportunities for NAGOYA RAILROAD and Yum China

0.44

Correlation Coefficient

NAGOYA RAILROAD  Yum China

Very weak diversification

The 3 months correlation between NAGOYA and Yum is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding NAGOYA RAILROAD 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 NAGOYA RAILROAD 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 NAGOYA RAILROAD 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 NAGOYA RAILROAD i.e., NAGOYA RAILROAD and Yum China go up and down completely randomly.

Pair Corralation between NAGOYA RAILROAD and Yum China

Assuming the 90 days horizon NAGOYA RAILROAD is expected to generate 0.83 times more return on investment than Yum China. However, NAGOYA RAILROAD is 1.21 times less risky than Yum China. It trades about 0.05 of its potential returns per unit of risk. Yum China Holdings is currently generating about 0.03 per unit of risk. If you would invest  970.00  in NAGOYA RAILROAD on October 26, 2024 and sell it today you would earn a total of  50.00  from holding NAGOYA RAILROAD or generate 5.15% return on investment over 90 days.

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

NAGOYA RAILROAD  vs.  Yum China Holdings

NAGOYA RAILROAD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAGOYA RAILROAD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NAGOYA RAILROAD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Yum China Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yum China Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Yum China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NAGOYA RAILROAD and Yum China

The main advantage of trading using opposite NAGOYA RAILROAD and Yum China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAGOYA RAILROAD 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.

The idea behind NAGOYA RAILROAD and Yum China 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.