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

-0.58

Correlation Coefficient

Groupon  IQIYI

Excellent diversification

The 3 months correlation between Groupon and IQIYI is -0.58. 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 1.66 times more volatile than iQIYI Inc. It trades about -0.01 of its total potential returns per unit of risk. iQIYI Inc is currently generating about 0.18 per unit of volatility. If you would invest  335.00  in iQIYI Inc on January 31, 2024 and sell it today you would earn a total of  150.00  from holding iQIYI Inc or generate 44.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Groupon  vs.  iQIYI Inc

Groupon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groupon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Groupon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

iQIYI Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..