Correlation Between El Pollo and Yum Brands
Can any of the company-specific risk be diversified away by investing in both El Pollo 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 El Pollo and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Pollo Loco and Yum Brands, you can compare the effects of market volatilities on El Pollo 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 El Pollo with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Pollo and Yum Brands.
Diversification Opportunities for El Pollo and Yum Brands
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between LOCO and Yum is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding El Pollo Loco and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and El Pollo 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 El Pollo Loco 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 El Pollo i.e., El Pollo and Yum Brands go up and down completely randomly.
Pair Corralation between El Pollo and Yum Brands
Given the investment horizon of 90 days El Pollo Loco is expected to under-perform the Yum Brands. In addition to that, El Pollo is 1.82 times more volatile than Yum Brands. It trades about -0.07 of its total potential returns per unit of risk. Yum Brands is currently generating about 0.18 per unit of volatility. If you would invest 13,396 in Yum Brands on September 13, 2024 and sell it today you would earn a total of 468.00 from holding Yum Brands or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Pollo Loco vs. Yum Brands
Performance |
| Timeline |
| El Pollo Loco |
| Yum Brands |
El Pollo and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with El Pollo and Yum Brands
The main advantage of trading using opposite El Pollo and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Pollo 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.| El Pollo vs. FAT Brands | El Pollo vs. Potbelly Co | El Pollo vs. BJs Restaurants | El Pollo vs. One Group Hospitality |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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