Correlation Between Yellow Pages and LifeSpeak

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

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

Diversification Opportunities for Yellow Pages and LifeSpeak

-0.67

Correlation Coefficient

Yellow Pages  LifeSpeak

Excellent diversification

The 3 months correlation between Yellow and LifeSpeak is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Yellow Pages Limited and LifeSpeak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LifeSpeak and Yellow Pages 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 Yellow Pages Limited are associated (or correlated) with LifeSpeak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LifeSpeak has no effect on the direction of Yellow Pages i.e., Yellow Pages and LifeSpeak go up and down completely randomly.

Pair Corralation between Yellow Pages and LifeSpeak

Assuming the 90 days horizon Yellow Pages is expected to generate 1.48 times less return on investment than LifeSpeak. But when comparing it to its historical volatility, Yellow Pages Limited is 5.75 times less risky than LifeSpeak. It trades about 0.34 of its potential returns per unit of risk. LifeSpeak is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  27.00  in LifeSpeak on September 23, 2024 and sell it today you would earn a total of  2.00  from holding LifeSpeak or generate 7.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Yellow Pages Limited  vs.  LifeSpeak

Yellow Pages Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yellow Pages Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Yellow Pages may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LifeSpeak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LifeSpeak has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Yellow Pages and LifeSpeak

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

The idea behind Yellow Pages Limited and LifeSpeak 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.