Correlation Between Yum Brands and Kate Spade

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

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

Diversification Opportunities for Yum Brands and Kate Spade

0.0

Correlation Coefficient

Yum Brands  Kate Spade

Pay attention - limited upside

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

Pair Corralation between Yum Brands and Kate Spade

If you would invest  13,969  in Yum Brands on March 7, 2024 and sell it today you would earn a total of  84.00  from holding Yum Brands or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Yum Brands  vs.  Kate Spade

Yum Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yum Brands are ranked lower than 1 (%) 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.

Kate Spade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kate Spade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kate Spade is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Yum Brands and Kate Spade

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

The idea behind Yum Brands and Kate Spade 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.