Correlation Between Yum Brands and BT Brands
Can any of the company-specific risk be diversified away by investing in both Yum Brands and BT 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 Yum Brands and BT Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and BT Brands Warrant, you can compare the effects of market volatilities on Yum Brands and BT 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 Yum Brands with a short position of BT Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and BT Brands.
Diversification Opportunities for Yum Brands and BT Brands
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Yum and BTBDW is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and BT Brands Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BT Brands Warrant 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 BT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BT Brands Warrant has no effect on the direction of Yum Brands i.e., Yum Brands and BT Brands go up and down completely randomly.
Pair Corralation between Yum Brands and BT Brands
Considering the 90-day investment horizon Yum Brands is expected to under-perform the BT Brands. But the stock apears to be less risky and, when comparing its historical volatility, Yum Brands is 46.43 times less risky than BT Brands. The stock trades about -0.22 of its potential returns per unit of risk. The BT Brands Warrant is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 7.93 in BT Brands Warrant on October 8, 2024 and sell it today you would earn a total of 1.32 from holding BT Brands Warrant or generate 16.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 47.37% |
Values | Daily Returns |
Yum Brands vs. BT Brands Warrant
Performance |
Timeline |
Yum Brands |
BT Brands Warrant |
Yum Brands and BT Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Yum Brands and BT Brands
The main advantage of trading using opposite Yum Brands and BT Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, BT 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 BT Brands will offset losses from the drop in BT Brands' long position.Yum Brands vs. Shake Shack | Yum Brands vs. Papa Johns International | Yum Brands vs. Dominos Pizza Common | Yum Brands vs. Jack In The |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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