Correlation Between Groupon and Group 1

Can any of the company-specific risk be diversified away by investing in both Groupon and Group 1 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 Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Groupon and Group 1 Automotive, you can compare the effects of market volatilities on Groupon and Group 1 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 Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and Group 1.

Diversification Opportunities for Groupon and Group 1

0.51

Correlation Coefficient

Groupon  Group 1

Very weak diversification

The 3 months correlation between Groupon and Group is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive 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 Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of Groupon i.e., Groupon and Group 1 go up and down completely randomly.

Pair Corralation between Groupon and Group 1

Given the investment horizon of 90 days Groupon is expected to generate 2.81 times more return on investment than Group 1. However, Groupon is 2.81 times more volatile than Group 1 Automotive. It trades about 0.17 of its potential returns per unit of risk. Group 1 Automotive is currently generating about 0.01 per unit of risk. If you would invest  1,678  in Groupon on May 5, 2025 and sell it today you would earn a total of  1,228  from holding Groupon or generate 73.18% return on investment over 90 days.

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

Groupon  vs.  Group 1 Automotive

Groupon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Groupon are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Groupon displayed solid returns over the last few months and may actually be approaching a breakup point.

Group 1 Automotive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Group 1 Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Group 1 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Groupon and Group 1

The main advantage of trading using opposite Groupon and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Groupon position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.

The idea behind Groupon and Group 1 Automotive 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.