Correlation Between Zillow and YY

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

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

Diversification Opportunities for Zillow and YY

0.1

Correlation Coefficient

Zillow  YY

Average diversification

The 3 months correlation between Zillow and YY is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group and YY Inc Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YY Inc Class and Zillow 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 Zillow Group are associated (or correlated) with YY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YY Inc Class has no effect on the direction of Zillow i.e., Zillow and YY go up and down completely randomly.

Pair Corralation between Zillow and YY

Allowing for the 90-day total investment horizon Zillow Group is expected to generate 1.23 times more return on investment than YY. However, Zillow is 1.23 times more volatile than YY Inc Class. It trades about 0.06 of its potential returns per unit of risk. YY Inc Class is currently generating about 0.06 per unit of risk. If you would invest  3,946  in Zillow Group on December 2, 2024 and sell it today you would earn a total of  3,493  from holding Zillow Group or generate 88.52% return on investment over 90 days.

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

Zillow Group  vs.  YY Inc Class

Zillow Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zillow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

YY Inc Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 5 (%) 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.

Pair Trading with Zillow and YY

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

The idea behind Zillow Group and YY Inc 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..