Correlation Between Yelp and ANGI Homeservices

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

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

Diversification Opportunities for Yelp and ANGI Homeservices

0.5

Correlation Coefficient

Yelp  ANGI Homeservices

Very weak diversification

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

Pair Corralation between Yelp and ANGI Homeservices

Given the investment horizon of 90 days Yelp Inc is expected to under-perform the ANGI Homeservices. But the stock apears to be less risky and, when comparing its historical volatility, Yelp Inc is 1.69 times less risky than ANGI Homeservices. The stock trades about -0.01 of its potential returns per unit of risk. The ANGI Homeservices is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,650  in ANGI Homeservices on December 27, 2024 and sell it today you would lose (7.00) from holding ANGI Homeservices or give up 0.42% of portfolio value over 90 days.

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

Yelp Inc  vs.  ANGI Homeservices

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

ANGI Homeservices

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ANGI Homeservices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, ANGI Homeservices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Yelp and ANGI Homeservices

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

The idea behind Yelp Inc and ANGI Homeservices 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.