Correlation Between Yum China and Xiabuxiabu Catering

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

Diversification Opportunities for Yum China and Xiabuxiabu Catering

-0.5

Correlation Coefficient

Yum China  Xiabuxiabu Catering

Very good diversification

The 3 months correlation between Yum and Xiabuxiabu is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Yum China Holdings and Xiabuxiabu Catering Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiabuxiabu Catering 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 Xiabuxiabu Catering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiabuxiabu Catering has no effect on the direction of Yum China i.e., Yum China and Xiabuxiabu Catering go up and down completely randomly.

Pair Corralation between Yum China and Xiabuxiabu Catering

Given the investment horizon of 90 days Yum China Holdings is expected to generate 0.25 times more return on investment than Xiabuxiabu Catering. However, Yum China Holdings is 4.03 times less risky than Xiabuxiabu Catering. It trades about 0.18 of its potential returns per unit of risk. Xiabuxiabu Catering Management is currently generating about -0.18 per unit of risk. If you would invest  3,370  in Yum China Holdings on August 30, 2024 and sell it today you would earn a total of  1,308  from holding Yum China Holdings or generate 38.81% return on investment over 90 days.

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

Yum China Holdings  vs.  Xiabuxiabu Catering Management

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.

Xiabuxiabu Catering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xiabuxiabu Catering Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Yum China and Xiabuxiabu Catering

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

The idea behind Yum China Holdings and Xiabuxiabu Catering Management 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.