Correlation Between Freddie Mac and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Freddie Mac and Yum Brands 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 Freddie Mac and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freddie Mac and Yum Brands, you can compare the effects of market volatilities on Freddie Mac and Yum Brands 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 Freddie Mac with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freddie Mac and Yum Brands.
Diversification Opportunities for Freddie Mac and Yum Brands
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Freddie and Yum is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Freddie Mac and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Freddie Mac 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 Freddie Mac are associated (or correlated) with Yum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum Brands has no effect on the direction of Freddie Mac i.e., Freddie Mac and Yum Brands go up and down completely randomly.
Pair Corralation between Freddie Mac and Yum Brands
Assuming the 90 days trading horizon Freddie Mac is expected to generate 11.67 times more return on investment than Yum Brands. However, Freddie Mac is 11.67 times more volatile than Yum Brands. It trades about 0.17 of its potential returns per unit of risk. Yum Brands is currently generating about -0.21 per unit of risk. If you would invest 341.00 in Freddie Mac on October 26, 2024 and sell it today you would earn a total of 234.00 from holding Freddie Mac or generate 68.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.35% |
| Values | Daily Returns |
Freddie Mac vs. Yum Brands
Performance |
| Timeline |
| Freddie Mac |
| Yum Brands |
Freddie Mac and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freddie Mac and Yum Brands
The main advantage of trading using opposite Freddie Mac and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freddie Mac position performs unexpectedly, Yum Brands 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 Yum Brands will offset losses from the drop in Yum Brands' long position.| Freddie Mac vs. European Metals Holdings | Freddie Mac vs. Beowulf Mining | Freddie Mac vs. Cornish Metals | Freddie Mac vs. GreenX Metals |
| Yum Brands vs. Hecla Mining Co | Yum Brands vs. United Airlines Holdings | Yum Brands vs. First Majestic Silver | Yum Brands vs. Evolution Gaming Group |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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