Correlation Between Brinker International and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Brinker International 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 Brinker International and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brinker International and Yum Brands, you can compare the effects of market volatilities on Brinker International 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 Brinker International with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker International and Yum Brands.
Diversification Opportunities for Brinker International and Yum Brands
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Brinker and Yum is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Brinker International 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 Brinker International 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 Brinker International i.e., Brinker International and Yum Brands go up and down completely randomly.
Pair Corralation between Brinker International and Yum Brands
Considering the 90-day investment horizon Brinker International is expected to generate 2.45 times more return on investment than Yum Brands. However, Brinker International is 2.45 times more volatile than Yum Brands. It trades about 0.47 of its potential returns per unit of risk. Yum Brands is currently generating about 0.01 per unit of risk. If you would invest 9,432 in Brinker International on August 24, 2024 and sell it today you would earn a total of 2,939 from holding Brinker International or generate 31.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brinker International vs. Yum Brands
Performance |
| Timeline |
| Brinker International |
| Yum Brands |
Brinker International and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brinker International and Yum Brands
The main advantage of trading using opposite Brinker International and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker International 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.| Brinker International vs. Bloomin Brands | Brinker International vs. BJs Restaurants | Brinker International vs. Darden Restaurants | Brinker International vs. Wingstop |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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