Correlation Between YY and IDT

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

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

Diversification Opportunities for YY and IDT

-0.34

Correlation Coefficient

YY  IDT

Very good diversification

The 3 months correlation between YY and IDT is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding YY Inc Class and IDT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDT Corporation and YY 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 YY Inc Class are associated (or correlated) with IDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDT Corporation has no effect on the direction of YY i.e., YY and IDT go up and down completely randomly.

Pair Corralation between YY and IDT

Allowing for the 90-day total investment horizon YY is expected to generate 5.33 times less return on investment than IDT. In addition to that, YY is 1.26 times more volatile than IDT Corporation. It trades about 0.04 of its total potential returns per unit of risk. IDT Corporation is currently generating about 0.24 per unit of volatility. If you would invest  4,707  in IDT Corporation on August 30, 2024 and sell it today you would earn a total of  457.00  from holding IDT Corporation or generate 9.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

YY Inc Class  vs.  IDT Corp.

YY Inc Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in YY Inc Class are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, YY showed solid returns over the last few months and may actually be approaching a breakup point.

IDT Corporation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDT Corporation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, IDT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YY and IDT

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

The idea behind YY Inc Class and IDT Corporation 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.