Correlation Between Yelp and Opera

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

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

Diversification Opportunities for Yelp and Opera

0.39

Correlation Coefficient

Yelp  Opera

Weak diversification

The 3 months correlation between Yelp and Opera is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Yelp Inc and Opera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opera 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 Opera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opera has no effect on the direction of Yelp i.e., Yelp and Opera go up and down completely randomly.

Pair Corralation between Yelp and Opera

Given the investment horizon of 90 days Yelp Inc is expected to generate 0.62 times more return on investment than Opera. However, Yelp Inc is 1.61 times less risky than Opera. It trades about 0.0 of its potential returns per unit of risk. Opera is currently generating about -0.02 per unit of risk. If you would invest  3,859  in Yelp Inc on December 28, 2024 and sell it today you would lose (22.00) from holding Yelp Inc or give up 0.57% of portfolio value over 90 days.

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

Yelp Inc  vs.  Opera

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.

Opera

Risk-Adjusted Performance

Very Weak

Over the last 90 days Opera has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Opera is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yelp and Opera

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

The idea behind Yelp Inc and Opera 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.