Correlation Between E Home and Yum Brands

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

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

Diversification Opportunities for E Home and Yum Brands

-0.28

Correlation Coefficient

E Home  Yum Brands

Very good diversification

The 3 months correlation between EJH and Yum is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding E Home Household Service and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and E Home 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 E Home Household Service are associated (or correlated) with Yum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum Brands has no effect on the direction of E Home i.e., E Home and Yum Brands go up and down completely randomly.

Pair Corralation between E Home and Yum Brands

Considering the 90-day investment horizon E Home Household Service is expected to under-perform the Yum Brands. In addition to that, E Home is 6.78 times more volatile than Yum Brands. It trades about -0.03 of its total potential returns per unit of risk. Yum Brands is currently generating about 0.0 per unit of volatility. If you would invest  13,245  in Yum Brands on September 25, 2024 and sell it today you would lose (9.00) from holding Yum Brands or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

E Home Household Service  vs.  Yum Brands

E Home Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Home Household Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Yum Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yum Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Yum Brands is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with E Home and Yum Brands

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

The idea behind E Home Household Service and Yum Brands 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.