Correlation Between United Airlines and Yum Brands
Can any of the company-specific risk be diversified away by investing in both United Airlines 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 United Airlines and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Airlines Holdings and Yum Brands, you can compare the effects of market volatilities on United Airlines 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 United Airlines with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Airlines and Yum Brands.
Diversification Opportunities for United Airlines and Yum Brands
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Yum is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and United Airlines 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 United Airlines Holdings 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 United Airlines i.e., United Airlines and Yum Brands go up and down completely randomly.
Pair Corralation between United Airlines and Yum Brands
Assuming the 90 days trading horizon United Airlines Holdings is expected to generate 2.02 times more return on investment than Yum Brands. However, United Airlines is 2.02 times more volatile than Yum Brands. It trades about 0.19 of its potential returns per unit of risk. Yum Brands is currently generating about -0.02 per unit of risk. If you would invest 9,901 in United Airlines Holdings on November 5, 2024 and sell it today you would earn a total of 817.00 from holding United Airlines Holdings or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Airlines Holdings vs. Yum Brands
Performance |
| Timeline |
| United Airlines Holdings |
| Yum Brands |
United Airlines and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Airlines and Yum Brands
The main advantage of trading using opposite United Airlines and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines 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.| United Airlines vs. Europa Metals | United Airlines vs. Geely Automobile Holdings | United Airlines vs. Rheinmetall AG | United Airlines vs. GoldMining |
| Yum Brands vs. GreenX Metals | Yum Brands vs. Dalata Hotel Group | Yum Brands vs. Coeur Mining | Yum Brands vs. Adriatic Metals |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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