Correlation Between Yum China and Jollibee Foods

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

By analyzing existing cross correlation between Yum China Holdings and Jollibee Foods, you can compare the effects of market volatilities on Yum China and Jollibee Foods 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 China with a short position of Jollibee Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum China and Jollibee Foods.

Diversification Opportunities for Yum China and Jollibee Foods

-0.42

Correlation Coefficient

Yum China  Jollibee Foods

Very good diversification

The 3 months correlation between Yum and Jollibee is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Jollibee Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods and Yum China 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 China Holdings are associated (or correlated) with Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods has no effect on the direction of Yum China i.e., Yum China and Jollibee Foods go up and down completely randomly.

Pair Corralation between Yum China and Jollibee Foods

Given the investment horizon of 90 days Yum China Holdings is expected to under-perform the Jollibee Foods. But the stock apears to be less risky and, when comparing its historical volatility, Yum China Holdings is 1.35 times less risky than Jollibee Foods. The stock trades about -0.01 of its potential returns per unit of risk. The Jollibee Foods is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  452.00  in Jollibee Foods on October 3, 2024 and sell it today you would earn a total of  4.00  from holding Jollibee Foods or generate 0.88% return on investment over 90 days.

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

Yum China Holdings  vs.  Jollibee Foods

Yum China Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yum China Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Yum China is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Jollibee Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jollibee Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Jollibee Foods 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 China and Jollibee Foods

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

The idea behind Yum China Holdings and Jollibee Foods 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.