Correlation Between Yum China and Pinstripes Holdings

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

Diversification Opportunities for Yum China and Pinstripes Holdings

-0.62

Correlation Coefficient

Yum China  Pinstripes Holdings

Excellent diversification

The 3 months correlation between Yum and Pinstripes is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Pinstripes Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinstripes Holdings 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 Pinstripes Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinstripes Holdings has no effect on the direction of Yum China i.e., Yum China and Pinstripes Holdings go up and down completely randomly.

Pair Corralation between Yum China and Pinstripes Holdings

Given the investment horizon of 90 days Yum China Holdings is expected to generate 0.38 times more return on investment than Pinstripes Holdings. However, Yum China Holdings is 2.63 times less risky than Pinstripes Holdings. It trades about 0.19 of its potential returns per unit of risk. Pinstripes Holdings is currently generating about -0.08 per unit of risk. If you would invest  3,478  in Yum China Holdings on September 13, 2024 and sell it today you would earn a total of  1,429  from holding Yum China Holdings or generate 41.09% return on investment over 90 days.

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

Yum China Holdings  vs.  Pinstripes Holdings

Yum China Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yum China Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Yum China exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pinstripes Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pinstripes Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Yum China and Pinstripes Holdings

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

The idea behind Yum China Holdings and Pinstripes 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..