Correlation Between Yelp and Gogo

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

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

Diversification Opportunities for Yelp and Gogo

0.61

Correlation Coefficient

Yelp  Gogo

Poor diversification

The 3 months correlation between Yelp and Gogo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Yelp Inc and Gogo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gogo Inc and Yelp 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 Yelp Inc are associated (or correlated) with Gogo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gogo Inc has no effect on the direction of Yelp i.e., Yelp and Gogo go up and down completely randomly.

Pair Corralation between Yelp and Gogo

Given the investment horizon of 90 days Yelp Inc is expected to generate 0.34 times more return on investment than Gogo. However, Yelp Inc is 2.93 times less risky than Gogo. It trades about 0.13 of its potential returns per unit of risk. Gogo Inc is currently generating about 0.03 per unit of risk. If you would invest  3,409  in Yelp Inc on September 4, 2024 and sell it today you would earn a total of  446.00  from holding Yelp Inc or generate 13.08% return on investment over 90 days.

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

Yelp Inc  vs.  Gogo Inc

Yelp Inc

Risk-Adjusted Performance

9 of 100

OK

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

Gogo Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gogo Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Gogo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Yelp and Gogo

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

The idea behind Yelp Inc and Gogo 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.