Correlation Between Yum Brands and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Yum Brands and Sensient Technologies 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 Sensient Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and Sensient Technologies, you can compare the effects of market volatilities on Yum Brands and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and Sensient Technologies.
Diversification Opportunities for Yum Brands and Sensient Technologies
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Yum and Sensient is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Yum Brands i.e., Yum Brands and Sensient Technologies go up and down completely randomly.
Pair Corralation between Yum Brands and Sensient Technologies
Considering the 90-day investment horizon Yum Brands is expected to generate 0.59 times more return on investment than Sensient Technologies. However, Yum Brands is 1.69 times less risky than Sensient Technologies. It trades about 0.07 of its potential returns per unit of risk. Sensient Technologies is currently generating about 0.02 per unit of risk. If you would invest 13,486 in Yum Brands on August 28, 2024 and sell it today you would earn a total of 219.00 from holding Yum Brands or generate 1.62% 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. Sensient Technologies
Performance |
| Timeline |
| Yum Brands |
| Sensient Technologies |
Yum Brands and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and Sensient Technologies
The main advantage of trading using opposite Yum Brands and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' long position.| Yum Brands vs. Shake Shack | Yum Brands vs. Papa Johns International | Yum Brands vs. Dominos Pizza | Yum Brands vs. Jack In The |
| Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller | Sensient Technologies vs. Northern Technologies | Sensient Technologies vs. Cabot |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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