Correlation Between YY and Snap

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

Diversification Opportunities for YY and Snap

-0.2

Correlation Coefficient

YY  Snap

Good diversification

The 3 months correlation between YY and Snap is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and Snap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap 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 Snap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap Inc has no effect on the direction of YY i.e., YY and Snap go up and down completely randomly.

Pair Corralation between YY and Snap

Allowing for the 90-day total investment horizon YY is expected to generate 1.83 times less return on investment than Snap. But when comparing it to its historical volatility, YY Inc Class is 1.33 times less risky than Snap. It trades about 0.09 of its potential returns per unit of risk. Snap Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  934.00  in Snap Inc on August 30, 2024 and sell it today you would earn a total of  227.00  from holding Snap Inc or generate 24.3% return on investment over 90 days.

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

YY Inc Class  vs.  Snap Inc

YY Inc Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, YY showed solid returns over the last few months and may actually be approaching a breakup point.

Snap Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snap Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, Snap reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YY and Snap

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

The idea behind YY Inc Class and Snap 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.