Correlation Between Groupon and Phoenix New
Can any of the company-specific risk be diversified away by investing in both Groupon and Phoenix New 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 Phoenix New into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Groupon and Phoenix New Media, you can compare the effects of market volatilities on Groupon and Phoenix New 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 Phoenix New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and Phoenix New.
Diversification Opportunities for Groupon and Phoenix New
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Groupon and Phoenix is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and Phoenix New Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phoenix New Media 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 Phoenix New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phoenix New Media has no effect on the direction of Groupon i.e., Groupon and Phoenix New go up and down completely randomly.
Pair Corralation between Groupon and Phoenix New
Given the investment horizon of 90 days Groupon is expected to under-perform the Phoenix New. But the stock apears to be less risky and, when comparing its historical volatility, Groupon is 1.34 times less risky than Phoenix New. The stock trades about -0.5 of its potential returns per unit of risk. The Phoenix New Media is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 170.00 in Phoenix New Media on January 21, 2024 and sell it today you would earn a total of 12.00 from holding Phoenix New Media or generate 7.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Groupon vs. Phoenix New Media
Performance |
| Timeline |
| Groupon |
| Phoenix New Media |
Groupon and Phoenix New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Groupon and Phoenix New
The main advantage of trading using opposite Groupon and Phoenix New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupon position performs unexpectedly, Phoenix New 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 Phoenix New will offset losses from the drop in Phoenix New's long position.The idea behind Groupon and Phoenix New Media 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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