Correlation Between JD SPORTS and Yum Brands

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Can any of the company-specific risk be diversified away by investing in both JD SPORTS 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 JD SPORTS and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JD SPORTS FASH and Yum Brands, you can compare the effects of market volatilities on JD SPORTS 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 JD SPORTS with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of JD SPORTS and Yum Brands.

Diversification Opportunities for JD SPORTS and Yum Brands

0.19
  Correlation Coefficient

Average diversification

The 3 months correlation between 9JD and Yum is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding JD SPORTS FASH and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and JD SPORTS 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 JD SPORTS FASH 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 JD SPORTS i.e., JD SPORTS and Yum Brands go up and down completely randomly.

Pair Corralation between JD SPORTS and Yum Brands

Assuming the 90 days horizon JD SPORTS FASH is expected to under-perform the Yum Brands. In addition to that, JD SPORTS is 1.11 times more volatile than Yum Brands. It trades about -0.04 of its total potential returns per unit of risk. Yum Brands is currently generating about 0.45 per unit of volatility. If you would invest  12,165  in Yum Brands on November 27, 2024 and sell it today you would earn a total of  2,210  from holding Yum Brands or generate 18.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

JD SPORTS FASH  vs.  Yum Brands

 Performance 
       Timeline  
JD SPORTS FASH 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days JD SPORTS FASH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Yum Brands 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yum Brands may actually be approaching a critical reversion point that can send shares even higher in March 2025.

JD SPORTS and Yum Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JD SPORTS and Yum Brands

The main advantage of trading using opposite JD SPORTS and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD SPORTS 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.
The idea behind JD SPORTS FASH and Yum Brands pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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