Correlation Between Fiverr International and Grom Social

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

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

Diversification Opportunities for Fiverr International and Grom Social

-0.35

Correlation Coefficient

Fiverr International  Grom Social

Very good diversification

The 3 months correlation between Fiverr and Grom is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fiverr International and Grom Social Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grom Social Enterprises and Fiverr International 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 Fiverr International are associated (or correlated) with Grom Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grom Social Enterprises has no effect on the direction of Fiverr International i.e., Fiverr International and Grom Social go up and down completely randomly.

Pair Corralation between Fiverr International and Grom Social

Given the investment horizon of 90 days Fiverr International is expected to generate 1.06 times more return on investment than Grom Social. However, Fiverr International is 1.06 times more volatile than Grom Social Enterprises. It trades about 0.18 of its potential returns per unit of risk. Grom Social Enterprises is currently generating about -0.29 per unit of risk. If you would invest  2,241  in Fiverr International on March 10, 2024 and sell it today you would earn a total of  212.00  from holding Fiverr International or generate 9.46% return on investment over 90 days.

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

Fiverr International  vs.  Grom Social Enterprises

Fiverr International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fiverr International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fiverr International may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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

Pair Trading with Fiverr International and Grom Social

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

The idea behind Fiverr International and Grom Social Enterprises 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.