Correlation Between GEN Restaurant and Yum Brands

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

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

Diversification Opportunities for GEN Restaurant and Yum Brands

0.05

Correlation Coefficient

GEN Restaurant  Yum Brands

Significant diversification

The 3 months correlation between GEN and Yum is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding GEN Restaurant Group, and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and GEN Restaurant 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 GEN Restaurant Group, 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 GEN Restaurant i.e., GEN Restaurant and Yum Brands go up and down completely randomly.

Pair Corralation between GEN Restaurant and Yum Brands

Given the investment horizon of 90 days GEN Restaurant Group, is expected to under-perform the Yum Brands. In addition to that, GEN Restaurant is 3.06 times more volatile than Yum Brands. It trades about -0.04 of its total potential returns per unit of risk. Yum Brands is currently generating about -0.08 per unit of volatility. If you would invest  13,462  in Yum Brands on September 23, 2024 and sell it today you would lose (226.00) from holding Yum Brands or give up 1.68% of portfolio value over 90 days.

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

GEN Restaurant Group,  vs.  Yum Brands

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Yum Brands

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Yum Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GEN Restaurant and Yum Brands

The main advantage of trading using opposite GEN Restaurant and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEN Restaurant 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 GEN Restaurant Group, 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.