Correlation Between Yum Brands and Baker Hughes
Can any of the company-specific risk be diversified away by investing in both Yum Brands and Baker Hughes 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 Baker Hughes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and Baker Hughes Co, you can compare the effects of market volatilities on Yum Brands and Baker Hughes 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 Baker Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and Baker Hughes.
Diversification Opportunities for Yum Brands and Baker Hughes
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Yum and Baker is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes 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 Baker Hughes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Hughes has no effect on the direction of Yum Brands i.e., Yum Brands and Baker Hughes go up and down completely randomly.
Pair Corralation between Yum Brands and Baker Hughes
Assuming the 90 days trading horizon Yum Brands is expected to generate 0.54 times more return on investment than Baker Hughes. However, Yum Brands is 1.84 times less risky than Baker Hughes. It trades about -0.11 of its potential returns per unit of risk. Baker Hughes Co is currently generating about -0.31 per unit of risk. If you would invest 13,440 in Yum Brands on September 23, 2024 and sell it today you would lose (285.00) from holding Yum Brands or give up 2.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yum Brands vs. Baker Hughes Co
Performance |
| Timeline |
| Yum Brands |
| Baker Hughes |
Yum Brands and Baker Hughes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and Baker Hughes
The main advantage of trading using opposite Yum Brands and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, Baker Hughes 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 Baker Hughes will offset losses from the drop in Baker Hughes' long position.| Yum Brands vs. Uniper SE | Yum Brands vs. Mulberry Group PLC | Yum Brands vs. London Security Plc | Yum Brands vs. Triad Group PLC |
| Baker Hughes vs. Southern Copper Corp | Baker Hughes vs. Endeavour Mining Corp | Baker Hughes vs. Metals Exploration Plc | Baker Hughes vs. AMG Advanced Metallurgical |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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