Correlation Between Willamette Valley and Yum Brands
Can any of the company-specific risk be diversified away by investing in both Willamette Valley 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 Willamette Valley and Yum Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willamette Valley Vineyards and Yum Brands, you can compare the effects of market volatilities on Willamette Valley 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 Willamette Valley with a short position of Yum Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and Yum Brands.
Diversification Opportunities for Willamette Valley and Yum Brands
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Willamette and Yum is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Yum Brands go up and down completely randomly.
Pair Corralation between Willamette Valley and Yum Brands
Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the Yum Brands. In addition to that, Willamette Valley is 2.2 times more volatile than Yum Brands. It trades about -0.05 of its total potential returns per unit of risk. Yum Brands is currently generating about -0.01 per unit of volatility. If you would invest 14,084 in Yum Brands on September 2, 2024 and sell it today you would lose (190.00) from holding Yum Brands or give up 1.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Willamette Valley Vineyards vs. Yum Brands
Performance |
| Timeline |
| Willamette Valley |
| Yum Brands |
Willamette Valley and Yum Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willamette Valley and Yum Brands
The main advantage of trading using opposite Willamette Valley and Yum Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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.| Willamette Valley vs. Brown Forman | Willamette Valley vs. Duckhorn Portfolio | Willamette Valley vs. Brown Forman | Willamette Valley vs. Constellation Brands Class |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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