Correlation Between CELLULAR GOODS and Yum Brands

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

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

Diversification Opportunities for CELLULAR GOODS and Yum Brands

0.16

Correlation Coefficient

CELLULAR GOODS  Yum Brands

Average diversification

The 3 months correlation between CELLULAR and Yum is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding CELLULAR GOODS LS and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and CELLULAR GOODS 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 CELLULAR GOODS LS are associated (or correlated) with Yum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum Brands has no effect on the direction of CELLULAR GOODS i.e., CELLULAR GOODS and Yum Brands go up and down completely randomly.

Pair Corralation between CELLULAR GOODS and Yum Brands

Assuming the 90 days horizon CELLULAR GOODS LS is expected to generate 11.16 times more return on investment than Yum Brands. However, CELLULAR GOODS is 11.16 times more volatile than Yum Brands. It trades about 0.13 of its potential returns per unit of risk. Yum Brands is currently generating about 0.09 per unit of risk. If you would invest  0.05  in CELLULAR GOODS LS on October 7, 2024 and sell it today you would earn a total of  0.05  from holding CELLULAR GOODS LS or generate 100.0% return on investment over 90 days.

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

CELLULAR GOODS LS  vs.  Yum Brands

CELLULAR GOODS LS

Risk-Adjusted Performance

10 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CELLULAR GOODS LS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CELLULAR GOODS reported solid returns over the last few months and may actually be approaching a breakup point.

Yum Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Yum Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CELLULAR GOODS and Yum Brands

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

The idea behind CELLULAR GOODS LS and Yum Brands 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.