Correlation Between Faron Pharmaceuticals and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Faron Pharmaceuticals 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 Faron Pharmaceuticals and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faron Pharmaceuticals Oy and Yum Brands, you can compare the effects of market volatilities on Faron Pharmaceuticals 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 Faron Pharmaceuticals with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faron Pharmaceuticals and Yum Brands.
Diversification Opportunities for Faron Pharmaceuticals and Yum Brands
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Faron and Yum is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Faron Pharmaceuticals Oy and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Faron Pharmaceuticals 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 Faron Pharmaceuticals Oy 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 Faron Pharmaceuticals i.e., Faron Pharmaceuticals and Yum Brands go up and down completely randomly.
Pair Corralation between Faron Pharmaceuticals and Yum Brands
Assuming the 90 days trading horizon Faron Pharmaceuticals Oy is expected to generate 4.83 times more return on investment than Yum Brands. However, Faron Pharmaceuticals is 4.83 times more volatile than Yum Brands. It trades about 0.2 of its potential returns per unit of risk. Yum Brands is currently generating about -0.46 per unit of risk. If you would invest 17,000 in Faron Pharmaceuticals Oy on October 14, 2024 and sell it today you would earn a total of 3,000 from holding Faron Pharmaceuticals Oy or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Faron Pharmaceuticals Oy vs. Yum Brands
Performance |
| Timeline |
| Faron Pharmaceuticals |
| Yum Brands |
Faron Pharmaceuticals and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faron Pharmaceuticals and Yum Brands
The main advantage of trading using opposite Faron Pharmaceuticals and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faron Pharmaceuticals 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.| Faron Pharmaceuticals vs. Omega Healthcare Investors | Faron Pharmaceuticals vs. Invesco Physical Silver | Faron Pharmaceuticals vs. Cardinal Health | Faron Pharmaceuticals vs. Anglo Asian Mining |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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