Correlation Between Gaia and Groupon

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Can any of the company-specific risk be diversified away by investing in both Gaia 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 Gaia and Groupon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gaia Inc and Groupon, you can compare the effects of market volatilities on Gaia 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 Gaia with a short position of Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaia and Groupon.

Diversification Opportunities for Gaia and Groupon

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Gaia and Groupon is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gaia Inc and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and Gaia 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 Gaia 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 Gaia i.e., Gaia and Groupon go up and down completely randomly.

Pair Corralation between Gaia and Groupon

Given the investment horizon of 90 days Gaia Inc is expected to generate 0.23 times more return on investment than Groupon. However, Gaia Inc is 4.42 times less risky than Groupon. It trades about 0.2 of its potential returns per unit of risk. Groupon is currently generating about -0.13 per unit of risk. If you would invest  285.00  in Gaia Inc on December 30, 2023 and sell it today you would earn a total of  23.00  from holding Gaia Inc or generate 8.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Gaia Inc  vs.  Groupon

 Performance 
       Timeline  
Gaia Inc 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Gaia Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Gaia sustained solid returns over the last few months and may actually be approaching a breakup point.
Groupon 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Groupon are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Groupon displayed solid returns over the last few months and may actually be approaching a breakup point.

Gaia and Groupon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gaia and Groupon

The main advantage of trading using opposite Gaia and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaia 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 Gaia 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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