Correlation Between Yelp and YY

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

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

Diversification Opportunities for Yelp and YY

-0.57

Correlation Coefficient

Yelp  YY

Excellent diversification

The 3 months correlation between Yelp and YY is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Yelp Inc and YY Inc Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YY Inc Class 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 YY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YY Inc Class has no effect on the direction of Yelp i.e., Yelp and YY go up and down completely randomly.

Pair Corralation between Yelp and YY

Given the investment horizon of 90 days Yelp Inc is expected to under-perform the YY. But the stock apears to be less risky and, when comparing its historical volatility, Yelp Inc is 1.59 times less risky than YY. The stock trades about -0.04 of its potential returns per unit of risk. The YY Inc Class is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,164  in YY Inc Class on December 26, 2024 and sell it today you would earn a total of  39.00  from holding YY Inc Class or generate 0.94% return on investment over 90 days.

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

Yelp Inc  vs.  YY Inc Class

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.

YY Inc Class

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, YY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yelp and YY

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

The idea behind Yelp Inc and YY Inc Class 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.