Correlation Between The Hartford and Yum Brands

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

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

Diversification Opportunities for The Hartford and Yum Brands

0.0

Correlation Coefficient

The Hartford  Yum Brands

Pay attention - limited upside

The 3 months correlation between The and Yum is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Balanced and Yum Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yum Brands and The Hartford 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 The Hartford Balanced are associated (or correlated) with Yum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yum Brands has no effect on the direction of The Hartford i.e., The Hartford and Yum Brands go up and down completely randomly.

Pair Corralation between The Hartford and Yum Brands

Assuming the 90 days horizon The Hartford Balanced is expected to generate 0.28 times more return on investment than Yum Brands. However, The Hartford Balanced is 3.59 times less risky than Yum Brands. It trades about 0.22 of its potential returns per unit of risk. Yum Brands is currently generating about -0.11 per unit of risk. If you would invest  1,396  in The Hartford Balanced on February 28, 2024 and sell it today you would earn a total of  23.00  from holding The Hartford Balanced or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

The Hartford Balanced  vs.  Yum Brands

Hartford Balanced

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Balanced are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, The Hartford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yum Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yum Brands has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with The Hartford and Yum Brands

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

The idea behind The Hartford Balanced and Yum Brands 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.