Correlation Between BOSTON BEER and Yum China
Can any of the company-specific risk be diversified away by investing in both BOSTON BEER and Yum China 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 BOSTON BEER and Yum China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BOSTON BEER A and Yum China Holdings, you can compare the effects of market volatilities on BOSTON BEER and Yum China 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 BOSTON BEER with a short position of Yum China. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOSTON BEER and Yum China.
Diversification Opportunities for BOSTON BEER and Yum China
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between BOSTON and Yum is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding BOSTON BEER A and Yum China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum China Holdings and BOSTON BEER 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 BOSTON BEER A are associated (or correlated) with Yum China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum China Holdings has no effect on the direction of BOSTON BEER i.e., BOSTON BEER and Yum China go up and down completely randomly.
Pair Corralation between BOSTON BEER and Yum China
Assuming the 90 days trading horizon BOSTON BEER A is expected to under-perform the Yum China. But the stock apears to be less risky and, when comparing its historical volatility, BOSTON BEER A is 1.23 times less risky than Yum China. The stock trades about -0.21 of its potential returns per unit of risk. The Yum China Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 4,484 in Yum China Holdings on December 12, 2024 and sell it today you would earn a total of 4.00 from holding Yum China Holdings or generate 0.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOSTON BEER A vs. Yum China Holdings
Performance |
| Timeline |
| BOSTON BEER A |
| Yum China Holdings |
BOSTON BEER and Yum China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOSTON BEER and Yum China
The main advantage of trading using opposite BOSTON BEER and Yum China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOSTON BEER position performs unexpectedly, Yum China 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 China will offset losses from the drop in Yum China's long position.| BOSTON BEER vs. Nexstar Media Group | ||
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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