Correlation Between Bloomin Brands and Yum China

Can any of the company-specific risk be diversified away by investing in both Bloomin 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 Bloomin 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 Bloomin Brands and Yum China Holdings, you can compare the effects of market volatilities on Bloomin 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 Bloomin Brands with a short position of Yum China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bloomin Brands and Yum China.

Diversification Opportunities for Bloomin Brands and Yum China

-0.48

Correlation Coefficient

Bloomin Brands  Yum China

Very good diversification

The 3 months correlation between Bloomin and Yum is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bloomin Brands 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 Bloomin 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 Bloomin Brands 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 Bloomin Brands i.e., Bloomin Brands and Yum China go up and down completely randomly.

Pair Corralation between Bloomin Brands and Yum China

Given the investment horizon of 90 days Bloomin Brands is expected to under-perform the Yum China. In addition to that, Bloomin Brands is 1.84 times more volatile than Yum China Holdings. It trades about -0.13 of its total potential returns per unit of risk. Yum China Holdings is currently generating about 0.08 per unit of volatility. If you would invest  4,858  in Yum China Holdings on December 20, 2024 and sell it today you would earn a total of  505.00  from holding Yum China Holdings or generate 10.4% return on investment over 90 days.

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

Bloomin Brands  vs.  Yum China Holdings

Bloomin Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bloomin Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Yum China Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yum China Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Yum China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bloomin Brands and Yum China

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

The idea behind Bloomin Brands 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.