Correlation Between Yum Brands and NIP Group

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

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

Diversification Opportunities for Yum Brands and NIP Group

-0.17

Correlation Coefficient

Yum Brands  NIP Group

Good diversification

The 3 months correlation between Yum and NIP is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and NIP Group American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIP Group American 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 NIP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIP Group American has no effect on the direction of Yum Brands i.e., Yum Brands and NIP Group go up and down completely randomly.

Pair Corralation between Yum Brands and NIP Group

Considering the 90-day investment horizon Yum Brands is expected to under-perform the NIP Group. But the stock apears to be less risky and, when comparing its historical volatility, Yum Brands is 2.4 times less risky than NIP Group. The stock trades about -0.31 of its potential returns per unit of risk. The NIP Group American is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  675.00  in NIP Group American on October 25, 2024 and sell it today you would earn a total of  5.00  from holding NIP Group American or generate 0.74% return on investment over 90 days.

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

Yum Brands  vs.  NIP Group American

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.

NIP Group American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIP Group American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NIP Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Yum Brands and NIP Group

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

The idea behind Yum Brands and NIP Group American 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.