Correlation Between Groupon and IAC
Can any of the company-specific risk be diversified away by investing in both Groupon and IAC 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 IAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Groupon and IAC Inc, you can compare the effects of market volatilities on Groupon and IAC 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 IAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and IAC.
Diversification Opportunities for Groupon and IAC
Poor diversification
The 3 months correlation between Groupon and IAC is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc 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 IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of Groupon i.e., Groupon and IAC go up and down completely randomly.
Pair Corralation between Groupon and IAC
Given the investment horizon of 90 days Groupon is expected to under-perform the IAC. In addition to that, Groupon is 3.12 times more volatile than IAC Inc. It trades about -0.2 of its total potential returns per unit of risk. IAC Inc is currently generating about -0.17 per unit of volatility. If you would invest 5,190 in IAC Inc on January 25, 2024 and sell it today you would lose (273.00) from holding IAC Inc or give up 5.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Groupon vs. IAC Inc
Performance |
| Timeline |
| Groupon |
| IAC Inc |
Groupon and IAC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Groupon and IAC
The main advantage of trading using opposite Groupon and IAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupon position performs unexpectedly, IAC 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 IAC will offset losses from the drop in IAC's long position.The idea behind Groupon and IAC Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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