Correlation Between YY and Arena Group

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

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

Diversification Opportunities for YY and Arena Group

0.26

Correlation Coefficient

YY  Arena Group

Modest diversification

The 3 months correlation between YY and Arena is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and Arena Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Group Holdings and YY 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 YY Inc Class are associated (or correlated) with Arena Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Group Holdings has no effect on the direction of YY i.e., YY and Arena Group go up and down completely randomly.

Pair Corralation between YY and Arena Group

Allowing for the 90-day total investment horizon YY is expected to generate 3.07 times less return on investment than Arena Group. But when comparing it to its historical volatility, YY Inc Class is 1.66 times less risky than Arena Group. It trades about 0.03 of its potential returns per unit of risk. Arena Group Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  142.00  in Arena Group Holdings on December 25, 2024 and sell it today you would earn a total of  11.00  from holding Arena Group Holdings or generate 7.75% return on investment over 90 days.

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

YY Inc Class  vs.  Arena Group Holdings

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 2 (%) 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.

Arena Group Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Group Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Arena Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YY and Arena Group

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

The idea behind YY Inc Class and Arena Group Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.