Correlation Between Yum Brands and Flanigans Enterprises

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

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

Diversification Opportunities for Yum Brands and Flanigans Enterprises

-0.13

Correlation Coefficient

Yum Brands  Flanigans Enterprises

Good diversification

The 3 months correlation between Yum and Flanigans is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Flanigans Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flanigans Enterprises and Yum 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 Yum Brands are associated (or correlated) with Flanigans Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flanigans Enterprises has no effect on the direction of Yum Brands i.e., Yum Brands and Flanigans Enterprises go up and down completely randomly.

Pair Corralation between Yum Brands and Flanigans Enterprises

Considering the 90-day investment horizon Yum Brands is expected to under-perform the Flanigans Enterprises. But the stock apears to be less risky and, when comparing its historical volatility, Yum Brands is 1.26 times less risky than Flanigans Enterprises. The stock trades about -0.08 of its potential returns per unit of risk. The Flanigans Enterprises is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,484  in Flanigans Enterprises on September 23, 2024 and sell it today you would lose (20.00) from holding Flanigans Enterprises or give up 0.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Yum Brands  vs.  Flanigans Enterprises

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 recent stock price disarray, may contribute to short-term losses for the investors.

Flanigans Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flanigans Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Yum Brands and Flanigans Enterprises

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

The idea behind Yum Brands and Flanigans Enterprises 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.