Correlation Between Yum China and Vail Resorts

Can any of the company-specific risk be diversified away by investing in both Yum China and Vail Resorts 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 Vail Resorts 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 Vail Resorts, you can compare the effects of market volatilities on Yum China and Vail Resorts 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 Vail Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yum China and Vail Resorts.

Diversification Opportunities for Yum China and Vail Resorts

-0.37

Correlation Coefficient

Yum China  Vail Resorts

Very good diversification

The 3 months correlation between Yum and Vail is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts 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 Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Yum China i.e., Yum China and Vail Resorts go up and down completely randomly.

Pair Corralation between Yum China and Vail Resorts

Given the investment horizon of 90 days Yum China Holdings is expected to generate 1.77 times more return on investment than Vail Resorts. However, Yum China is 1.77 times more volatile than Vail Resorts. It trades about 0.18 of its potential returns per unit of risk. Vail Resorts is currently generating about 0.0 per unit of risk. If you would invest  3,374  in Yum China Holdings on September 2, 2024 and sell it today you would earn a total of  1,281  from holding Yum China Holdings or generate 37.97% return on investment over 90 days.

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

Yum China Holdings  vs.  Vail Resorts

Yum China Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yum China Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Yum China exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yum China and Vail Resorts

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

The idea behind Yum China Holdings and Vail Resorts 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..