Correlation Between Yum Brands and Northstar Clean

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

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

Diversification Opportunities for Yum Brands and Northstar Clean

-0.32

Correlation Coefficient

Yum Brands  Northstar Clean

Very good diversification

The 3 months correlation between Yum and Northstar is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech 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 Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Yum Brands i.e., Yum Brands and Northstar Clean go up and down completely randomly.

Pair Corralation between Yum Brands and Northstar Clean

Considering the 90-day investment horizon Yum Brands is expected to generate 0.46 times more return on investment than Northstar Clean. However, Yum Brands is 2.19 times less risky than Northstar Clean. It trades about 0.17 of its potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.02 per unit of risk. If you would invest  13,323  in Yum Brands on December 21, 2024 and sell it today you would earn a total of  2,466  from holding Yum Brands or generate 18.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Yum Brands  vs.  Northstar Clean Technologies

Yum Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 13 (%) 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.

Northstar Clean Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northstar Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Yum Brands and Northstar Clean

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

The idea behind Yum Brands and Northstar Clean Technologies 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.