Correlation Between Yum Brands and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Yum Brands and Cadence Design 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 Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and Cadence Design Systems, you can compare the effects of market volatilities on Yum Brands and Cadence Design 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 Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and Cadence Design.
Diversification Opportunities for Yum Brands and Cadence Design
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Yum and Cadence is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems 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 Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Yum Brands i.e., Yum Brands and Cadence Design go up and down completely randomly.
Pair Corralation between Yum Brands and Cadence Design
Considering the 90-day investment horizon Yum Brands is expected to generate 0.4 times more return on investment than Cadence Design. However, Yum Brands is 2.51 times less risky than Cadence Design. It trades about 0.16 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.02 per unit of risk. If you would invest 13,461 in Yum Brands on September 14, 2024 and sell it today you would earn a total of 393.00 from holding Yum Brands or generate 2.92% 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. Cadence Design Systems
Performance |
| Timeline |
| Yum Brands |
| Cadence Design Systems |
Yum Brands and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and Cadence Design
The main advantage of trading using opposite Yum Brands and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, Cadence Design 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 Cadence Design will offset losses from the drop in Cadence Design's long position.The idea behind Yum Brands and Cadence Design Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Cadence Design vs. Dave Warrants | Cadence Design vs. Swvl Holdings Corp | Cadence Design vs. Guardforce AI Co | Cadence Design vs. Thayer Ventures Acquisition |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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