Correlation Between Farmers and Yelp

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

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

Diversification Opportunities for Farmers and Yelp

0.62

Correlation Coefficient

Farmers  Yelp

Poor diversification

The 3 months correlation between Farmers and Yelp is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Farmers And Merchants and Yelp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yelp Inc and Farmers 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 Farmers And Merchants 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 Farmers i.e., Farmers and Yelp go up and down completely randomly.

Pair Corralation between Farmers and Yelp

Given the investment horizon of 90 days Farmers And Merchants is expected to under-perform the Yelp. But the otc stock apears to be less risky and, when comparing its historical volatility, Farmers And Merchants is 1.13 times less risky than Yelp. The otc stock trades about -0.12 of its potential returns per unit of risk. The Yelp Inc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,479  in Yelp Inc on January 25, 2024 and sell it today you would lose (464.00) from holding Yelp Inc or give up 10.36% of portfolio value over 90 days.

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

Farmers And Merchants  vs.  Yelp Inc

Farmers And Merchants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmers And Merchants has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Yelp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yelp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Farmers and Yelp

The main advantage of trading using opposite Farmers and Yelp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers 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.

The idea behind Farmers And Merchants and Yelp 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.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.