Correlation Between Grom Social and Groupon

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

By analyzing existing cross correlation between Grom Social Enterprises and Groupon, you can compare the effects of market volatilities on Grom Social 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 Grom Social with a short position of Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grom Social and Groupon.

Diversification Opportunities for Grom Social and Groupon

0.29

Correlation Coefficient

Grom Social  Groupon

Modest diversification

The 3 months correlation between Grom and Groupon is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Grom Social Enterprises and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and Grom Social 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 Grom Social Enterprises 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 Grom Social i.e., Grom Social and Groupon go up and down completely randomly.

Pair Corralation between Grom Social and Groupon

Given the investment horizon of 90 days Grom Social Enterprises is expected to generate 0.83 times more return on investment than Groupon. However, Grom Social Enterprises is 1.2 times less risky than Groupon. It trades about -0.48 of its potential returns per unit of risk. Groupon is currently generating about -0.49 per unit of risk. If you would invest  95.00  in Grom Social Enterprises on January 20, 2024 and sell it today you would lose (29.00) from holding Grom Social Enterprises or give up 30.53% of portfolio value over 90 days.

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

Grom Social Enterprises  vs.  Groupon

Grom Social Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Grom Social and Groupon

The main advantage of trading using opposite Grom Social and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grom Social 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 Grom Social Enterprises 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.