Correlation Between Yum China and Darden Restaurants
Can any of the company-specific risk be diversified away by investing in both Yum China and Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants, you can compare the effects of market volatilities on Yum China and Darden Restaurants 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 Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum China and Darden Restaurants.
Diversification Opportunities for Yum China and Darden Restaurants
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Yum and Darden is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Yum China i.e., Yum China and Darden Restaurants go up and down completely randomly.
Pair Corralation between Yum China and Darden Restaurants
Given the investment horizon of 90 days Yum China is expected to generate 1.2 times less return on investment than Darden Restaurants. In addition to that, Yum China is 1.16 times more volatile than Darden Restaurants. It trades about 0.14 of its total potential returns per unit of risk. Darden Restaurants is currently generating about 0.2 per unit of volatility. If you would invest 16,220 in Darden Restaurants on August 28, 2024 and sell it today you would earn a total of 1,302 from holding Darden Restaurants or generate 8.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yum China Holdings vs. Darden Restaurants
Performance |
| Timeline |
| Yum China Holdings |
| Darden Restaurants |
Yum China and Darden Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum China and Darden Restaurants
The main advantage of trading using opposite Yum China and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum China position performs unexpectedly, Darden Restaurants 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 Darden Restaurants will offset losses from the drop in Darden Restaurants' long position.| Yum China vs. Darden Restaurants | Yum China vs. The Wendys Co | Yum China vs. Dominos Pizza | Yum China vs. Restaurant Brands International |
| Darden Restaurants vs. Dine Brands Global | Darden Restaurants vs. Bloomin Brands | Darden Restaurants vs. BJs Restaurants | Darden Restaurants vs. The Cheesecake Factory |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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