Correlation Between Yum Brands and 482480AM2

Can any of the company-specific risk be diversified away by investing in both Yum Brands and 482480AM2 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 482480AM2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yum Brands and KLAC 495 15 JUL 52, you can compare the effects of market volatilities on Yum Brands and 482480AM2 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 482480AM2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and 482480AM2.

Diversification Opportunities for Yum Brands and 482480AM2

-0.57

Correlation Coefficient

Yum Brands  482480AM2

Excellent diversification

The 3 months correlation between Yum and 482480AM2 is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and KLAC 495 15 JUL 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLAC 495 15 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 482480AM2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLAC 495 15 has no effect on the direction of Yum Brands i.e., Yum Brands and 482480AM2 go up and down completely randomly.

Pair Corralation between Yum Brands and 482480AM2

Considering the 90-day investment horizon Yum Brands is expected to under-perform the 482480AM2. But the stock apears to be less risky and, when comparing its historical volatility, Yum Brands is 2.56 times less risky than 482480AM2. The stock trades about -0.29 of its potential returns per unit of risk. The KLAC 495 15 JUL 52 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,085  in KLAC 495 15 JUL 52 on October 22, 2024 and sell it today you would lose (6.00) from holding KLAC 495 15 JUL 52 or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Yum Brands  vs.  KLAC 495 15 JUL 52

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.

KLAC 495 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLAC 495 15 JUL 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 482480AM2 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yum Brands and 482480AM2

The main advantage of trading using opposite Yum Brands and 482480AM2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, 482480AM2 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 482480AM2 will offset losses from the drop in 482480AM2's long position.

The idea behind Yum Brands and KLAC 495 15 JUL 52 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.