Correlation Between Hooker Furniture and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Hooker Furniture 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 Hooker Furniture and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hooker Furniture and Yum Brands, you can compare the effects of market volatilities on Hooker Furniture 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 Hooker Furniture with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hooker Furniture and Yum Brands.
Diversification Opportunities for Hooker Furniture and Yum Brands
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hooker and Yum is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Hooker Furniture 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 Hooker Furniture 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 Hooker Furniture i.e., Hooker Furniture and Yum Brands go up and down completely randomly.
Pair Corralation between Hooker Furniture and Yum Brands
Given the investment horizon of 90 days Hooker Furniture is expected to generate 2.67 times more return on investment than Yum Brands. However, Hooker Furniture is 2.67 times more volatile than Yum Brands. It trades about 0.01 of its potential returns per unit of risk. Yum Brands is currently generating about 0.02 per unit of risk. If you would invest 1,927 in Hooker Furniture on September 1, 2024 and sell it today you would lose (54.00) from holding Hooker Furniture or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hooker Furniture vs. Yum Brands
Performance |
| Timeline |
| Hooker Furniture |
| Yum Brands |
Hooker Furniture and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hooker Furniture and Yum Brands
The main advantage of trading using opposite Hooker Furniture and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hooker Furniture 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.| Hooker Furniture vs. Bassett Furniture Industries | Hooker Furniture vs. Willis Lease Finance | Hooker Furniture vs. Rocky Brands | Hooker Furniture vs. First Business Financial |
| Yum Brands vs. The Wendys Co | Yum Brands vs. Shake Shack | Yum Brands vs. Papa Johns International | Yum Brands vs. Darden Restaurants |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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