Correlation Between Yum Brands and E Home

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

By analyzing existing cross correlation between Yum Brands and E Home Household Service, you can compare the effects of market volatilities on Yum Brands and E Home 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 E Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and E Home.

Diversification Opportunities for Yum Brands and E Home

-0.26

Correlation Coefficient

Yum Brands  E Home

Very good diversification

The 3 months correlation between Yum and EJH is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and E Home Household Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Home Household 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 E Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Home Household has no effect on the direction of Yum Brands i.e., Yum Brands and E Home go up and down completely randomly.

Pair Corralation between Yum Brands and E Home

Considering the 90-day investment horizon Yum Brands is expected to generate 0.09 times more return on investment than E Home. However, Yum Brands is 11.57 times less risky than E Home. It trades about -0.01 of its potential returns per unit of risk. E Home Household Service is currently generating about -0.04 per unit of risk. If you would invest  13,631  in Yum Brands on October 8, 2024 and sell it today you would lose (287.00) from holding Yum Brands or give up 2.11% of portfolio value over 90 days.

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

Yum Brands  vs.  E Home Household Service

Yum Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yum Brands has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking indicators, E Home is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Yum Brands and E Home

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

The idea behind Yum Brands and E Home Household Service 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.