Correlation Between Yelp and Cheetah Mobile

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

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

Diversification Opportunities for Yelp and Cheetah Mobile

-0.3

Correlation Coefficient

Yelp  Cheetah Mobile

Very good diversification

The 3 months correlation between Yelp and Cheetah is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Yelp Inc and Cheetah Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheetah Mobile 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 Cheetah Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheetah Mobile has no effect on the direction of Yelp i.e., Yelp and Cheetah Mobile go up and down completely randomly.

Pair Corralation between Yelp and Cheetah Mobile

Given the investment horizon of 90 days Yelp Inc is expected to generate 0.41 times more return on investment than Cheetah Mobile. However, Yelp Inc is 2.45 times less risky than Cheetah Mobile. It trades about -0.07 of its potential returns per unit of risk. Cheetah Mobile is currently generating about -0.05 per unit of risk. If you would invest  3,933  in Yelp Inc on January 7, 2025 and sell it today you would lose (367.00) from holding Yelp Inc or give up 9.33% of portfolio value over 90 days.

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

Yelp Inc  vs.  Cheetah Mobile

Yelp Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yelp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Cheetah Mobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cheetah Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Yelp and Cheetah Mobile

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

The idea behind Yelp Inc and Cheetah Mobile 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.