Correlation Between Dine Brands and Yum China

Can any of the company-specific risk be diversified away by investing in both Dine Brands and Yum China 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 Dine Brands and Yum China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dine Brands Global and Yum China Holdings, you can compare the effects of market volatilities on Dine Brands and Yum China 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 Dine Brands with a short position of Yum China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dine Brands and Yum China.

Diversification Opportunities for Dine Brands and Yum China

0.26

Correlation Coefficient

Dine Brands  Yum China

Modest diversification

The 3 months correlation between Dine and Yum is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dine Brands Global and Yum China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum China Holdings and Dine 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 Dine Brands Global are associated (or correlated) with Yum China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum China Holdings has no effect on the direction of Dine Brands i.e., Dine Brands and Yum China go up and down completely randomly.

Pair Corralation between Dine Brands and Yum China

Considering the 90-day investment horizon Dine Brands Global is expected to under-perform the Yum China. In addition to that, Dine Brands is 1.15 times more volatile than Yum China Holdings. It trades about -0.27 of its total potential returns per unit of risk. Yum China Holdings is currently generating about 0.17 per unit of volatility. If you would invest  4,678  in Yum China Holdings on September 28, 2024 and sell it today you would earn a total of  301.00  from holding Yum China Holdings or generate 6.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Dine Brands Global  vs.  Yum China Holdings

Dine Brands Global

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dine Brands Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Dine Brands is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Yum China Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yum China Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Yum China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dine Brands and Yum China

The main advantage of trading using opposite Dine Brands and Yum China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dine Brands position performs unexpectedly, Yum China 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 Yum China will offset losses from the drop in Yum China's long position.

The idea behind Dine Brands Global and Yum China Holdings 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.