Correlation Between Yum China and Gan
Can any of the company-specific risk be diversified away by investing in both Yum China and Gan 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 Gan 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 Gan, you can compare the effects of market volatilities on Yum China and Gan 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 Gan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum China and Gan.
Diversification Opportunities for Yum China and Gan
Very weak diversification
The 3 months correlation between Yum and Gan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Gan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gan 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 Gan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gan has no effect on the direction of Yum China i.e., Yum China and Gan go up and down completely randomly.
Pair Corralation between Yum China and Gan
Given the investment horizon of 90 days Yum China Holdings is expected to generate 1.42 times more return on investment than Gan. However, Yum China is 1.42 times more volatile than Gan. It trades about 0.06 of its potential returns per unit of risk. Gan is currently generating about 0.06 per unit of risk. If you would invest 3,489 in Yum China Holdings on August 29, 2024 and sell it today you would earn a total of 1,059 from holding Yum China Holdings or generate 30.35% 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. Gan
Performance |
| Timeline |
| Yum China Holdings |
| Gan |
Yum China and Gan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yum China and Gan
The main advantage of trading using opposite Yum China and Gan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yum China position performs unexpectedly, Gan 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 Gan will offset losses from the drop in Gan's long position.| Yum China vs. Darden Restaurants | Yum China vs. The Wendys Co | Yum China vs. Dominos Pizza | Yum China vs. Restaurant Brands International |
| Gan vs. Rush Street Interactive | Gan vs. Inspired Entertainment | Gan vs. PointsBet Holdings Limited | Gan vs. PlayAGS |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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