Correlation Between Nextdoor Holdings and Groupon
Can any of the company-specific risk be diversified away by investing in both Nextdoor Holdings 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 Nextdoor Holdings and Groupon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextdoor Holdings and Groupon, you can compare the effects of market volatilities on Nextdoor Holdings 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 Nextdoor Holdings with a short position of Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextdoor Holdings and Groupon.
Diversification Opportunities for Nextdoor Holdings and Groupon
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nextdoor and Groupon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nextdoor Holdings and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and Nextdoor Holdings 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 Nextdoor Holdings 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 Nextdoor Holdings i.e., Nextdoor Holdings and Groupon go up and down completely randomly.
Pair Corralation between Nextdoor Holdings and Groupon
Given the investment horizon of 90 days Nextdoor Holdings is expected to generate 0.71 times more return on investment than Groupon. However, Nextdoor Holdings is 1.41 times less risky than Groupon. It trades about 0.02 of its potential returns per unit of risk. Groupon is currently generating about -0.27 per unit of risk. If you would invest 242.00 in Nextdoor Holdings on October 26, 2024 and sell it today you would earn a total of 1.00 from holding Nextdoor Holdings or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextdoor Holdings vs. Groupon
Performance |
| Timeline |
| Nextdoor Holdings |
| Groupon |
Nextdoor Holdings and Groupon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextdoor Holdings and Groupon
The main advantage of trading using opposite Nextdoor Holdings and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextdoor Holdings 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.| Nextdoor Holdings vs. IAC Inc | Nextdoor Holdings vs. Yelp Inc | Nextdoor Holdings vs. Groupon | Nextdoor Holdings vs. Outbrain |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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