Correlation Between Yum Brands and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Yum Brands and BBB Foods 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 BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum Brands and BBB Foods, you can compare the effects of market volatilities on Yum Brands and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and BBB Foods.
Diversification Opportunities for Yum Brands and BBB Foods
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Yum and BBB is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Yum Brands i.e., Yum Brands and BBB Foods go up and down completely randomly.
Pair Corralation between Yum Brands and BBB Foods
Considering the 90-day investment horizon Yum Brands is expected to generate 13.96 times less return on investment than BBB Foods. But when comparing it to its historical volatility, Yum Brands is 3.11 times less risky than BBB Foods. It trades about 0.02 of its potential returns per unit of risk. BBB Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,750 in BBB Foods on September 2, 2024 and sell it today you would earn a total of 1,072 from holding BBB Foods or generate 61.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 55.38% |
| Values | Daily Returns |
Yum Brands vs. BBB Foods
Performance |
| Timeline |
| Yum Brands |
| BBB Foods |
Yum Brands and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum Brands and BBB Foods
The main advantage of trading using opposite Yum Brands and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum Brands position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.The idea behind Yum Brands and BBB Foods 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.| BBB Foods vs. Ingles Markets Incorporated | BBB Foods vs. Grocery Outlet Holding | BBB Foods vs. Ocado Group plc | BBB Foods vs. Sprouts Farmers Market |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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