Correlation Between Yum Brands and Fly E

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

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

Diversification Opportunities for Yum Brands and Fly E

-0.49

Correlation Coefficient

Yum Brands  Fly E

Very good diversification

The 3 months correlation between Yum and Fly is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Fly E Group, Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fly E Group, 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 Fly E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fly E Group, has no effect on the direction of Yum Brands i.e., Yum Brands and Fly E go up and down completely randomly.

Pair Corralation between Yum Brands and Fly E

Considering the 90-day investment horizon Yum Brands is expected to generate 1.54 times less return on investment than Fly E. But when comparing it to its historical volatility, Yum Brands is 5.08 times less risky than Fly E. It trades about 0.14 of its potential returns per unit of risk. Fly E Group, Common is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Fly E Group, Common on December 25, 2024 and sell it today you would earn a total of  1.00  from holding Fly E Group, Common or generate 2.22% return on investment over 90 days.

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

Yum Brands  vs.  Fly E Group, Common

Yum Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Yum Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

Fly E Group,

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fly E Group, Common are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Fly E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yum Brands and Fly E

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

The idea behind Yum Brands and Fly E Group, Common 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.