Correlation Between Yum China and Dutch Bros
Can any of the company-specific risk be diversified away by investing in both Yum China and Dutch Bros 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 China and Dutch Bros into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yum China Holdings and Dutch Bros, you can compare the effects of market volatilities on Yum China and Dutch Bros 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 China with a short position of Dutch Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum China and Dutch Bros.
Diversification Opportunities for Yum China and Dutch Bros
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Yum and Dutch is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Dutch Bros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dutch Bros and Yum China 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 China Holdings are associated (or correlated) with Dutch Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dutch Bros has no effect on the direction of Yum China i.e., Yum China and Dutch Bros go up and down completely randomly.
Pair Corralation between Yum China and Dutch Bros
Given the investment horizon of 90 days Yum China Holdings is expected to under-perform the Dutch Bros. But the stock apears to be less risky and, when comparing its historical volatility, Yum China Holdings is 1.47 times less risky than Dutch Bros. The stock trades about -0.21 of its potential returns per unit of risk. The Dutch Bros is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,232 in Dutch Bros on October 20, 2024 and sell it today you would earn a total of 738.00 from holding Dutch Bros or generate 14.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Yum China Holdings vs. Dutch Bros
Performance |
| Timeline |
| Yum China Holdings |
| Dutch Bros |
Yum China and Dutch Bros Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum China and Dutch Bros
The main advantage of trading using opposite Yum China and Dutch Bros positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum China position performs unexpectedly, Dutch Bros 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 Dutch Bros will offset losses from the drop in Dutch Bros' long position.| Yum China vs. Darden Restaurants | Yum China vs. The Wendys Co | Yum China vs. Dominos Pizza Common | Yum China vs. Restaurant Brands International |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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