Correlation Between Yum Brands and BLUESCOPE STEEL
Can any of the company-specific risk be diversified away by investing in both Yum Brands and BLUESCOPE STEEL 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 Yum Brands and BLUESCOPE STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and BLUESCOPE STEEL, you can compare the effects of market volatilities on Yum Brands and BLUESCOPE STEEL 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 Yum Brands with a short position of BLUESCOPE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and BLUESCOPE STEEL.
Diversification Opportunities for Yum Brands and BLUESCOPE STEEL
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Yum and BLUESCOPE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and BLUESCOPE STEEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLUESCOPE STEEL and Yum 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 Yum Brands are associated (or correlated) with BLUESCOPE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLUESCOPE STEEL has no effect on the direction of Yum Brands i.e., Yum Brands and BLUESCOPE STEEL go up and down completely randomly.
Pair Corralation between Yum Brands and BLUESCOPE STEEL
Assuming the 90 days horizon Yum Brands is expected to generate 2.57 times less return on investment than BLUESCOPE STEEL. But when comparing it to its historical volatility, Yum Brands is 1.92 times less risky than BLUESCOPE STEEL. It trades about 0.03 of its potential returns per unit of risk. BLUESCOPE STEEL is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,219 in BLUESCOPE STEEL on September 12, 2024 and sell it today you would earn a total of 101.00 from holding BLUESCOPE STEEL or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yum Brands vs. BLUESCOPE STEEL
Performance |
| Timeline |
| Yum Brands |
| BLUESCOPE STEEL |
Yum Brands and BLUESCOPE STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and BLUESCOPE STEEL
The main advantage of trading using opposite Yum Brands and BLUESCOPE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, BLUESCOPE STEEL 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 BLUESCOPE STEEL will offset losses from the drop in BLUESCOPE STEEL's long position.| Yum Brands vs. Starbucks | Yum Brands vs. Superior Plus Corp | Yum Brands vs. SIVERS SEMICONDUCTORS AB | Yum Brands vs. NorAm Drilling AS |
| BLUESCOPE STEEL vs. Apple Inc | BLUESCOPE STEEL vs. Apple Inc | BLUESCOPE STEEL vs. Apple Inc | BLUESCOPE STEEL vs. Apple Inc |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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