Correlation Between YY and Alphabet

Can any of the company-specific risk be diversified away by investing in both YY and Alphabet 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 Alphabet 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 Alphabet Inc Class A, you can compare the effects of market volatilities on YY and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of YY and Alphabet.

Diversification Opportunities for YY and Alphabet

-0.46

Correlation Coefficient

YY  Alphabet

Very good diversification

The 3 months correlation between YY and Alphabet is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and Alphabet Inc Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of YY i.e., YY and Alphabet go up and down completely randomly.

Pair Corralation between YY and Alphabet

Allowing for the 90-day total investment horizon YY Inc Class is expected to generate 1.56 times more return on investment than Alphabet. However, YY is 1.56 times more volatile than Alphabet Inc Class A. It trades about 0.04 of its potential returns per unit of risk. Alphabet Inc Class A is currently generating about -0.13 per unit of risk. If you would invest  4,107  in YY Inc Class on December 28, 2024 and sell it today you would earn a total of  156.00  from holding YY Inc Class or generate 3.8% return on investment over 90 days.

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

YY Inc Class  vs.  Alphabet Inc Class A

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 weak basic indicators, YY may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alphabet Class A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with YY and Alphabet

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

The idea behind YY Inc Class and Alphabet Inc Class A 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.