Correlation Between Groupon and Sea
Can any of the company-specific risk be diversified away by investing in both Groupon and Sea 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 Groupon and Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Groupon and Sea, you can compare the effects of market volatilities on Groupon and Sea 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 Groupon with a short position of Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and Sea.
Diversification Opportunities for Groupon and Sea
Pay attention - limited upside
The 3 months correlation between Groupon and Sea is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea and Groupon 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 Groupon are associated (or correlated) with Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Groupon i.e., Groupon and Sea go up and down completely randomly.
Pair Corralation between Groupon and Sea
Given the investment horizon of 90 days Groupon is expected to generate 1.87 times more return on investment than Sea. However, Groupon is 1.87 times more volatile than Sea. It trades about 0.05 of its potential returns per unit of risk. Sea is currently generating about 0.06 per unit of risk. If you would invest 572.00 in Groupon on August 31, 2024 and sell it today you would earn a total of 366.00 from holding Groupon or generate 63.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Groupon vs. Sea
Performance |
| Timeline |
| Groupon |
| Sea |
Groupon and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Groupon and Sea
The main advantage of trading using opposite Groupon and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupon position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.The idea behind Groupon and Sea 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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