Correlation Between Public Service and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Public Service 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 Public Service and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Service Enterprise and Yum Brands, you can compare the effects of market volatilities on Public Service 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 Public Service with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and Yum Brands.
Diversification Opportunities for Public Service and Yum Brands
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Public and Yum is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Public Service 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 Public Service Enterprise 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 Public Service i.e., Public Service and Yum Brands go up and down completely randomly.
Pair Corralation between Public Service and Yum Brands
Assuming the 90 days trading horizon Public Service is expected to generate 1.1 times less return on investment than Yum Brands. But when comparing it to its historical volatility, Public Service Enterprise is 3.36 times less risky than Yum Brands. It trades about 0.07 of its potential returns per unit of risk. Yum Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 12,237 in Yum Brands on September 23, 2024 and sell it today you would earn a total of 918.00 from holding Yum Brands or generate 7.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.78% |
| Values | Daily Returns |
Public Service Enterprise vs. Yum Brands
Performance |
| Timeline |
| Public Service Enterprise |
| Yum Brands |
Public Service and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Public Service and Yum Brands
The main advantage of trading using opposite Public Service and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service 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.| Public Service vs. Uniper SE | Public Service vs. Mulberry Group PLC | Public Service vs. London Security Plc | Public Service vs. Triad Group PLC |
| Yum Brands vs. Uniper SE | Yum Brands vs. Mulberry Group PLC | Yum Brands vs. London Security Plc | Yum Brands vs. Triad Group PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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