Correlation Between Yum Brands and United

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

By analyzing existing cross correlation between Yum Brands and United States Cellular, you can compare the effects of market volatilities on Yum Brands and United 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 United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum Brands and United.

Diversification Opportunities for Yum Brands and United

-0.33

Correlation Coefficient

Yum Brands  United

Very good diversification

The 3 months correlation between Yum and United is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Yum Brands and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Yum Brands i.e., Yum Brands and United go up and down completely randomly.

Pair Corralation between Yum Brands and United

Considering the 90-day investment horizon Yum Brands is expected to generate 0.41 times more return on investment than United. However, Yum Brands is 2.42 times less risky than United. It trades about 0.04 of its potential returns per unit of risk. United States Cellular is currently generating about -0.14 per unit of risk. If you would invest  13,391  in Yum Brands on September 15, 2024 and sell it today you would earn a total of  309.00  from holding Yum Brands or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Yum Brands  vs.  United States Cellular

Yum Brands

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

United States Cellular

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Cellular has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for United States Cellular investors.

Pair Trading with Yum Brands and United

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

The idea behind Yum Brands and United States Cellular 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.