Correlation Between Yum China and Restaurant Brands
Can any of the company-specific risk be diversified away by investing in both Yum China and Restaurant 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 Yum China and Restaurant Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum China Holdings and Restaurant Brands International, you can compare the effects of market volatilities on Yum China and Restaurant 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 Yum China with a short position of Restaurant Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum China and Restaurant Brands.
Diversification Opportunities for Yum China and Restaurant Brands
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Yum and Restaurant is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands and Yum China 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 China Holdings are associated (or correlated) with Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of Yum China i.e., Yum China and Restaurant Brands go up and down completely randomly.
Pair Corralation between Yum China and Restaurant Brands
Assuming the 90 days horizon Yum China Holdings is expected to generate 2.14 times more return on investment than Restaurant Brands. However, Yum China is 2.14 times more volatile than Restaurant Brands International. It trades about 0.06 of its potential returns per unit of risk. Restaurant Brands International is currently generating about -0.27 per unit of risk. If you would invest 4,450 in Yum China Holdings on November 4, 2024 and sell it today you would earn a total of 107.00 from holding Yum China Holdings or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yum China Holdings vs. Restaurant Brands Internationa
Performance |
| Timeline |
| Yum China Holdings |
| Restaurant Brands |
Yum China and Restaurant Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum China and Restaurant Brands
The main advantage of trading using opposite Yum China and Restaurant Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum China position performs unexpectedly, Restaurant 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 Restaurant Brands will offset losses from the drop in Restaurant Brands' long position.| Yum China vs. COMBA TELECOM SYST | Yum China vs. Comba Telecom Systems | Yum China vs. Khiron Life Sciences | Yum China vs. TELECOM ITALIA |
| Restaurant Brands vs. MAVEN WIRELESS SWEDEN | Restaurant Brands vs. PULSION Medical Systems | Restaurant Brands vs. Compugroup Medical SE | Restaurant Brands vs. Caseys General Stores |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |