Correlation Between Yum Brands and Joint Stock

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

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

Diversification Opportunities for Yum Brands and Joint Stock

0.36

Correlation Coefficient

Yum Brands  Joint Stock

Weak diversification

The 3 months correlation between Yum and Joint is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Yum Brands i.e., Yum Brands and Joint Stock go up and down completely randomly.

Pair Corralation between Yum Brands and Joint Stock

Considering the 90-day investment horizon Yum Brands is expected to generate 18.19 times less return on investment than Joint Stock. But when comparing it to its historical volatility, Yum Brands is 2.65 times less risky than Joint Stock. It trades about 0.01 of its potential returns per unit of risk. Joint Stock is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,562  in Joint Stock on October 12, 2024 and sell it today you would earn a total of  2,601  from holding Joint Stock or generate 39.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	67.68%
Values	Daily Returns

Yum Brands  vs.  Joint Stock

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 latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Yum Brands and Joint Stock

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

The idea behind Yum Brands and Joint Stock 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.