Correlation Between Yelp and Gossan Resources

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

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

Diversification Opportunities for Yelp and Gossan Resources

-0.31

Correlation Coefficient

Yelp  Gossan Resources

Very good diversification

The 3 months correlation between Yelp and Gossan is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Yelp Inc and Gossan Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gossan Resources 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 Gossan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gossan Resources has no effect on the direction of Yelp i.e., Yelp and Gossan Resources go up and down completely randomly.

Pair Corralation between Yelp and Gossan Resources

Given the investment horizon of 90 days Yelp Inc is expected to generate 0.27 times more return on investment than Gossan Resources. However, Yelp Inc is 3.76 times less risky than Gossan Resources. It trades about 0.1 of its potential returns per unit of risk. Gossan Resources Limited is currently generating about -0.12 per unit of risk. If you would invest  3,508  in Yelp Inc on September 29, 2024 and sell it today you would earn a total of  375.00  from holding Yelp Inc or generate 10.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Yelp Inc  vs.  Gossan Resources Limited

Yelp Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yelp Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Yelp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gossan Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gossan Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Yelp and Gossan Resources

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

The idea behind Yelp Inc and Gossan Resources Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.