Correlation Between Check Point and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Check Point 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 Check Point and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Check Point Software and Yum Brands, you can compare the effects of market volatilities on Check Point 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 Check Point with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Yum Brands.
Diversification Opportunities for Check Point and Yum Brands
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Check and Yum is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Check Point 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 Check Point Software 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 Check Point i.e., Check Point and Yum Brands go up and down completely randomly.
Pair Corralation between Check Point and Yum Brands
Assuming the 90 days trading horizon Check Point is expected to generate 1.85 times less return on investment than Yum Brands. But when comparing it to its historical volatility, Check Point Software is 3.61 times less risky than Yum Brands. It trades about 0.06 of its potential returns per unit of risk. Yum Brands is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 12,365 in Yum Brands on August 29, 2024 and sell it today you would earn a total of 1,544 from holding Yum Brands or generate 12.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Check Point Software vs. Yum Brands
Performance |
| Timeline |
| Check Point Software |
| Yum Brands |
Check Point and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and Yum Brands
The main advantage of trading using opposite Check Point and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point 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.| Check Point vs. Toyota Motor Corp | Check Point vs. OTP Bank Nyrt | Check Point vs. Cognizant Technology Solutions | Check Point vs. Lendinvest PLC |
| Yum Brands vs. Lendinvest PLC | Yum Brands vs. Neometals | Yum Brands vs. Coor Service Management | Yum Brands vs. Albion Technology General |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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