Correlation Between Match and Yelp

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

By analyzing existing cross correlation between Match Group and Yelp Inc, you can compare the effects of market volatilities on Match and Yelp 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 Match with a short position of Yelp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Match and Yelp.

Diversification Opportunities for Match and Yelp

0.59

Correlation Coefficient

Match  Yelp

Very weak diversification

The 3 months correlation between Match and Yelp is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Match Group and Yelp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yelp Inc and Match 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 Match Group are associated (or correlated) with Yelp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yelp Inc has no effect on the direction of Match i.e., Match and Yelp go up and down completely randomly.

Pair Corralation between Match and Yelp

Given the investment horizon of 90 days Match Group is expected to generate 1.11 times more return on investment than Yelp. However, Match is 1.11 times more volatile than Yelp Inc. It trades about -0.01 of its potential returns per unit of risk. Yelp Inc is currently generating about -0.02 per unit of risk. If you would invest  3,261  in Match Group on December 29, 2024 and sell it today you would lose (77.00) from holding Match Group or give up 2.36% of portfolio value over 90 days.

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

Match Group  vs.  Yelp Inc

Match Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Match Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Match is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Yelp Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yelp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Yelp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Match and Yelp

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

The idea behind Match Group and Yelp Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.