Correlation Between BuzzFeed and Yelp
Can any of the company-specific risk be diversified away by investing in both BuzzFeed and Yelp 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 BuzzFeed and Yelp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BuzzFeed and Yelp Inc, you can compare the effects of market volatilities on BuzzFeed and Yelp 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 BuzzFeed with a short position of Yelp. Check out your portfolio center. Please also check ongoing floating volatility patterns of BuzzFeed and Yelp.
Diversification Opportunities for BuzzFeed and Yelp
Poor diversification
The 3 months correlation between BuzzFeed and Yelp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BuzzFeed and Yelp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yelp Inc and BuzzFeed 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 BuzzFeed are associated (or correlated) with Yelp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yelp Inc has no effect on the direction of BuzzFeed i.e., BuzzFeed and Yelp go up and down completely randomly.
Pair Corralation between BuzzFeed and Yelp
Given the investment horizon of 90 days BuzzFeed is expected to generate 3.48 times more return on investment than Yelp. However, BuzzFeed is 3.48 times more volatile than Yelp Inc. It trades about 0.37 of its potential returns per unit of risk. Yelp Inc is currently generating about 0.23 per unit of risk. If you would invest 255.00 in BuzzFeed on August 27, 2024 and sell it today you would earn a total of 169.00 from holding BuzzFeed or generate 66.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BuzzFeed vs. Yelp Inc
Performance |
| Timeline |
| BuzzFeed |
| Yelp Inc |
BuzzFeed and Yelp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BuzzFeed and Yelp
The main advantage of trading using opposite BuzzFeed and Yelp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BuzzFeed position performs unexpectedly, Yelp 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 Yelp will offset losses from the drop in Yelp's long position.| BuzzFeed vs. MediaAlpha | BuzzFeed vs. Asset Entities Class | BuzzFeed vs. Yelp Inc | BuzzFeed vs. Shutterstock |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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