Correlation Between YY and Zillow Group

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

Diversification Opportunities for YY and Zillow Group

0.6

Correlation Coefficient

YY  Zillow Group

Poor diversification

The 3 months correlation between YY and Zillow is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and Zillow Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group Class 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 Zillow Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zillow Group Class has no effect on the direction of YY i.e., YY and Zillow Group go up and down completely randomly.

Pair Corralation between YY and Zillow Group

Allowing for the 90-day total investment horizon YY Inc Class is expected to generate 2.13 times more return on investment than Zillow Group. However, YY is 2.13 times more volatile than Zillow Group Class. It trades about 0.24 of its potential returns per unit of risk. Zillow Group Class is currently generating about 0.21 per unit of risk. If you would invest  3,386  in YY Inc Class on September 12, 2024 and sell it today you would earn a total of  660.00  from holding YY Inc Class or generate 19.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

YY Inc Class  vs.  Zillow Group Class

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.

Zillow Group Class

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group Class are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Zillow Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YY and Zillow Group

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

The idea behind YY Inc Class and Zillow Group 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.