Correlation Between Yum Brands and Biglari Holdings
Can any of the company-specific risk be diversified away by investing in both Yum Brands and Biglari Holdings 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 Biglari Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and Biglari Holdings, you can compare the effects of market volatilities on Yum Brands and Biglari Holdings 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 Biglari Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and Biglari Holdings.
Diversification Opportunities for Yum Brands and Biglari Holdings
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Yum and Biglari is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings 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 Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Yum Brands i.e., Yum Brands and Biglari Holdings go up and down completely randomly.
Pair Corralation between Yum Brands and Biglari Holdings
Considering the 90-day investment horizon Yum Brands is expected to generate 1.12 times more return on investment than Biglari Holdings. However, Yum Brands is 1.12 times more volatile than Biglari Holdings. It trades about 0.35 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.14 per unit of risk. If you would invest 13,027 in Yum Brands on November 28, 2024 and sell it today you would earn a total of 2,388 from holding Yum Brands or generate 18.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yum Brands vs. Biglari Holdings
Performance |
| Timeline |
| Yum Brands |
| Biglari Holdings |
Yum Brands and Biglari Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and Biglari Holdings
The main advantage of trading using opposite Yum Brands and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, Biglari Holdings 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 Biglari Holdings will offset losses from the drop in Biglari Holdings' long position.| Yum Brands vs. Shake Shack | Yum Brands vs. Papa Johns International | Yum Brands vs. Dominos Pizza Common | Yum Brands vs. Jack In The |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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