Correlation Between IQIYI and Groupon
Can any of the company-specific risk be diversified away by investing in both IQIYI 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 IQIYI and Groupon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iQIYI Inc and Groupon, you can compare the effects of market volatilities on IQIYI 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 IQIYI with a short position of Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQIYI and Groupon.
Diversification Opportunities for IQIYI and Groupon
Very good diversification
The 3 months correlation between IQIYI and Groupon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and IQIYI 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 iQIYI 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 IQIYI i.e., IQIYI and Groupon go up and down completely randomly.
Pair Corralation between IQIYI and Groupon
Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 0.76 times more return on investment than Groupon. However, iQIYI Inc is 1.31 times less risky than Groupon. It trades about 0.12 of its potential returns per unit of risk. Groupon is currently generating about -0.39 per unit of risk. If you would invest 406.00 in iQIYI Inc on January 24, 2024 and sell it today you would earn a total of 25.00 from holding iQIYI Inc or generate 6.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iQIYI Inc vs. Groupon
Performance |
| Timeline |
| iQIYI Inc |
| Groupon |
IQIYI and Groupon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IQIYI and Groupon
The main advantage of trading using opposite IQIYI and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQIYI 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 iQIYI 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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