Correlation Between Yum Brands and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Yum Brands and Verizon Communications 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 Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and Verizon Communications, you can compare the effects of market volatilities on Yum Brands and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and Verizon Communications.
Diversification Opportunities for Yum Brands and Verizon Communications
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Yum and Verizon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Yum Brands i.e., Yum Brands and Verizon Communications go up and down completely randomly.
Pair Corralation between Yum Brands and Verizon Communications
Assuming the 90 days trading horizon Yum Brands is expected to generate 1.22 times less return on investment than Verizon Communications. In addition to that, Yum Brands is 1.58 times more volatile than Verizon Communications. It trades about 0.16 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.3 per unit of volatility. If you would invest 4,110 in Verizon Communications on September 5, 2024 and sell it today you would earn a total of 280.00 from holding Verizon Communications or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yum Brands vs. Verizon Communications
Performance |
| Timeline |
| Yum Brands |
| Verizon Communications |
Yum Brands and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and Verizon Communications
The main advantage of trading using opposite Yum Brands and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Yum Brands vs. Verizon Communications | Yum Brands vs. Zegona Communications Plc | Yum Brands vs. Gaztransport et Technigaz | Yum Brands vs. Zoom Video Communications |
| Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Hyundai Motor | Verizon Communications vs. Toyota Motor Corp |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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