Correlation Between Yum Brands and Dave Busters

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

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

Diversification Opportunities for Yum Brands and Dave Busters

0.12

Correlation Coefficient

Yum Brands  Dave Busters

Average diversification

The 3 months correlation between Yum and Dave is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and Dave Busters Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Busters Enterta and Yum 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 Yum Brands are associated (or correlated) with Dave Busters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Busters Enterta has no effect on the direction of Yum Brands i.e., Yum Brands and Dave Busters go up and down completely randomly.

Pair Corralation between Yum Brands and Dave Busters

Assuming the 90 days horizon Yum Brands is expected to generate 0.28 times more return on investment than Dave Busters. However, Yum Brands is 3.62 times less risky than Dave Busters. It trades about 0.07 of its potential returns per unit of risk. Dave Busters Entertainment is currently generating about -0.01 per unit of risk. If you would invest  11,885  in Yum Brands on September 26, 2024 and sell it today you would earn a total of  640.00  from holding Yum Brands or generate 5.38% return on investment over 90 days.

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

Yum Brands  vs.  Dave Busters Entertainment

Yum Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Yum Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dave Busters is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Yum Brands and Dave Busters

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

The idea behind Yum Brands and Dave Busters Entertainment 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 Transaction History module to view history of all your transactions and understand their impact on performance.