Correlation Between Charter Communications and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Charter Communications 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 Charter Communications and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications and Yum Brands, you can compare the effects of market volatilities on Charter Communications 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 Charter Communications with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Yum Brands.
Diversification Opportunities for Charter Communications and Yum Brands
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Charter and Yum is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Charter Communications 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 Charter Communications 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 Charter Communications i.e., Charter Communications and Yum Brands go up and down completely randomly.
Pair Corralation between Charter Communications and Yum Brands
Assuming the 90 days trading horizon Charter Communications is expected to generate 1.58 times more return on investment than Yum Brands. However, Charter Communications is 1.58 times more volatile than Yum Brands. It trades about -0.11 of its potential returns per unit of risk. Yum Brands is currently generating about -0.18 per unit of risk. If you would invest 35,140 in Charter Communications on October 10, 2024 and sell it today you would lose (1,545) from holding Charter Communications or give up 4.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. Yum Brands
Performance |
| Timeline |
| Charter Communications |
| Yum Brands |
Charter Communications and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Yum Brands
The main advantage of trading using opposite Charter Communications and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications 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.| Charter Communications vs. Hua Hong Semiconductor | Charter Communications vs. Elmos Semiconductor SE | Charter Communications vs. MagnaChip Semiconductor Corp | Charter Communications vs. JLF INVESTMENT |
| Yum Brands vs. OPKO HEALTH | Yum Brands vs. Thai Beverage Public | Yum Brands vs. Planet Fitness | Yum Brands vs. MOLSON RS BEVERAGE |
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 Stocks Directory module to find actively traded stocks across global markets.
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