Correlation Between IAC and Groupon
Can any of the company-specific risk be diversified away by investing in both IAC and Groupon 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 IAC and Groupon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IAC Inc and Groupon, you can compare the effects of market volatilities on IAC and Groupon 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 IAC with a short position of Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAC and Groupon.
Diversification Opportunities for IAC and Groupon
Very weak diversification
The 3 months correlation between IAC and Groupon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding IAC Inc and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and IAC 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 IAC Inc are associated (or correlated) with Groupon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groupon has no effect on the direction of IAC i.e., IAC and Groupon go up and down completely randomly.
Pair Corralation between IAC and Groupon
Considering the 90-day investment horizon IAC Inc is expected to under-perform the Groupon. But the stock apears to be less risky and, when comparing its historical volatility, IAC Inc is 1.99 times less risky than Groupon. The stock trades about -0.05 of its potential returns per unit of risk. The Groupon is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,025 in Groupon on August 26, 2024 and sell it today you would lose (93.00) from holding Groupon or give up 9.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAC Inc vs. Groupon
Performance |
| Timeline |
| IAC Inc |
| Groupon |
IAC and Groupon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAC and Groupon
The main advantage of trading using opposite IAC and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAC position performs unexpectedly, Groupon 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 Groupon will offset losses from the drop in Groupon's long position.The idea behind IAC Inc and Groupon 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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