Correlation Between YY and IAC

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

Diversification Opportunities for YY and IAC

0.45

Correlation Coefficient

YY  IAC

Very weak diversification

The 3 months correlation between YY and IAC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc 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 IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of YY i.e., YY and IAC go up and down completely randomly.

Pair Corralation between YY and IAC

Allowing for the 90-day total investment horizon YY is expected to generate 3.25 times less return on investment than IAC. In addition to that, YY is 1.38 times more volatile than IAC Inc. It trades about 0.03 of its total potential returns per unit of risk. IAC Inc is currently generating about 0.12 per unit of volatility. If you would invest  4,319  in IAC Inc on December 25, 2024 and sell it today you would earn a total of  681.00  from holding IAC Inc or generate 15.77% return on investment over 90 days.

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

YY Inc Class  vs.  IAC Inc

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.

IAC Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IAC Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, IAC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YY and IAC

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

The idea behind YY Inc Class and IAC Inc 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.