Correlation Between Groupon and IQIYI
Can any of the company-specific risk be diversified away by investing in both Groupon and IQIYI 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 IQIYI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Groupon and iQIYI Inc, you can compare the effects of market volatilities on Groupon and IQIYI 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 IQIYI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and IQIYI.
Diversification Opportunities for Groupon and IQIYI
Very good diversification
The 3 months correlation between Groupon and IQIYI is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI 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 IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Groupon i.e., Groupon and IQIYI go up and down completely randomly.
Pair Corralation between Groupon and IQIYI
Given the investment horizon of 90 days Groupon is expected to under-perform the IQIYI. In addition to that, Groupon is 2.05 times more volatile than iQIYI Inc. It trades about -0.19 of its total potential returns per unit of risk. iQIYI Inc is currently generating about 0.13 per unit of volatility. If you would invest 359.00 in iQIYI Inc on January 19, 2024 and sell it today you would earn a total of 58.00 from holding iQIYI Inc or generate 16.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Groupon vs. iQIYI Inc
Performance |
| Timeline |
| Groupon |
| iQIYI Inc |
Groupon and IQIYI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Groupon and IQIYI
The main advantage of trading using opposite Groupon and IQIYI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupon position performs unexpectedly, IQIYI 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 IQIYI will offset losses from the drop in IQIYI's long position.The idea behind Groupon and iQIYI 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.| IQIYI vs. Roku Inc | IQIYI vs. Paramount Global Class | IQIYI vs. Warner Bros Discovery | IQIYI vs. Paramount Global Class |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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