Correlation Between Dine Brands and Yum China

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

Diversification Opportunities for Dine Brands and Yum China

0.18

Correlation Coefficient

Dine Brands  Yum China

Average diversification

The 3 months correlation between Dine and Yum is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global 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 Dine 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 Dine Brands Global 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 Dine Brands i.e., Dine Brands and Yum China go up and down completely randomly.

Pair Corralation between Dine Brands and Yum China

Considering the 90-day investment horizon Dine Brands Global is expected to generate 0.95 times more return on investment than Yum China. However, Dine Brands Global is 1.05 times less risky than Yum China. It trades about -0.07 of its potential returns per unit of risk. Yum China Holdings is currently generating about -0.33 per unit of risk. If you would invest  3,091  in Dine Brands Global on October 8, 2024 and sell it today you would lose (87.00) from holding Dine Brands Global or give up 2.81% of portfolio value over 90 days.

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

Dine Brands Global  vs.  Yum China Holdings

Dine Brands Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Dine Brands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Yum China Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yum China Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Yum China is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dine Brands and Yum China

The main advantage of trading using opposite Dine Brands and Yum China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dine 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 Dine Brands Global 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.