Correlation Between Restaurant Brands and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands 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 Restaurant Brands and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Yum Brands, you can compare the effects of market volatilities on Restaurant Brands 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 Restaurant Brands with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Yum Brands.
Diversification Opportunities for Restaurant Brands and Yum Brands
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Restaurant and Yum is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Restaurant Brands 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 Restaurant Brands 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 Restaurant Brands i.e., Restaurant Brands and Yum Brands go up and down completely randomly.
Pair Corralation between Restaurant Brands and Yum Brands
Considering the 90-day investment horizon Restaurant Brands International is expected to generate 1.25 times more return on investment than Yum Brands. However, Restaurant Brands is 1.25 times more volatile than Yum Brands. It trades about 0.02 of its potential returns per unit of risk. Yum Brands is currently generating about 0.02 per unit of risk. If you would invest 6,148 in Restaurant Brands International on August 27, 2024 and sell it today you would earn a total of 762.00 from holding Restaurant Brands International or generate 12.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Yum Brands
Performance |
| Timeline |
| Restaurant Brands |
| Yum Brands |
Restaurant Brands and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Yum Brands
The main advantage of trading using opposite Restaurant Brands and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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.| Restaurant Brands vs. Yum Brands | Restaurant Brands vs. Papa Johns International | Restaurant Brands vs. Jack In The | Restaurant Brands vs. Dominos Pizza |
| Yum Brands vs. Shake Shack | Yum Brands vs. Papa Johns International | Yum Brands vs. Dominos Pizza | Yum Brands vs. Jack In The |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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