Correlation Between Yelp and MediaAlpha

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

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

Diversification Opportunities for Yelp and MediaAlpha

-0.77

Correlation Coefficient

Yelp  MediaAlpha

Pay attention - limited upside

The 3 months correlation between Yelp and MediaAlpha is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Yelp Inc and MediaAlpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaAlpha 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 MediaAlpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaAlpha has no effect on the direction of Yelp i.e., Yelp and MediaAlpha go up and down completely randomly.

Pair Corralation between Yelp and MediaAlpha

Given the investment horizon of 90 days Yelp Inc is expected to generate 0.34 times more return on investment than MediaAlpha. However, Yelp Inc is 2.98 times less risky than MediaAlpha. It trades about 0.13 of its potential returns per unit of risk. MediaAlpha is currently generating about -0.07 per unit of risk. If you would invest  3,356  in Yelp Inc on September 1, 2024 and sell it today you would earn a total of  466.00  from holding Yelp Inc or generate 13.89% return on investment over 90 days.

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

Yelp Inc  vs.  MediaAlpha

Yelp Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yelp Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Yelp reported solid returns over the last few months and may actually be approaching a breakup point.

MediaAlpha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MediaAlpha has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Yelp and MediaAlpha

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

The idea behind Yelp Inc and MediaAlpha 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.