Correlation Between Groupon and MediaAlpha

Can any of the company-specific risk be diversified away by investing in both Groupon and MediaAlpha 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 MediaAlpha into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Groupon and MediaAlpha, you can compare the effects of market volatilities on Groupon and MediaAlpha 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 MediaAlpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and MediaAlpha.

Diversification Opportunities for Groupon and MediaAlpha

-0.03

Correlation Coefficient

Groupon  MediaAlpha

Good diversification

The 3 months correlation between Groupon and MediaAlpha is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and MediaAlpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaAlpha 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 MediaAlpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaAlpha has no effect on the direction of Groupon i.e., Groupon and MediaAlpha go up and down completely randomly.

Pair Corralation between Groupon and MediaAlpha

Given the investment horizon of 90 days Groupon is expected to generate 8.26 times less return on investment than MediaAlpha. In addition to that, Groupon is 1.31 times more volatile than MediaAlpha. It trades about 0.03 of its total potential returns per unit of risk. MediaAlpha is currently generating about 0.29 per unit of volatility. If you would invest  1,861  in MediaAlpha on February 7, 2024 and sell it today you would earn a total of  392.00  from holding MediaAlpha or generate 21.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Groupon  vs.  MediaAlpha

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

MediaAlpha

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MediaAlpha are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, MediaAlpha showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Groupon and MediaAlpha

The main advantage of trading using opposite Groupon and MediaAlpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupon position performs unexpectedly, MediaAlpha 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 MediaAlpha will offset losses from the drop in MediaAlpha's long position.

The idea behind Groupon and MediaAlpha 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 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.