Correlation Between MediaAlpha and Grom Social

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

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

Diversification Opportunities for MediaAlpha and Grom Social

0.13

Correlation Coefficient

MediaAlpha  Grom Social

Average diversification

The 3 months correlation between MediaAlpha and Grom is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding MediaAlpha 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 MediaAlpha 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 MediaAlpha 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 MediaAlpha i.e., MediaAlpha and Grom Social go up and down completely randomly.

Pair Corralation between MediaAlpha and Grom Social

Considering the 90-day investment horizon MediaAlpha is expected to generate 0.98 times more return on investment than Grom Social. However, MediaAlpha is 1.02 times less risky than Grom Social. It trades about -0.05 of its potential returns per unit of risk. Grom Social Enterprises is currently generating about -0.2 per unit of risk. If you would invest  1,900  in MediaAlpha on February 23, 2024 and sell it today you would lose (91.00) from holding MediaAlpha or give up 4.79% of portfolio value over 90 days.

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

MediaAlpha  vs.  Grom Social Enterprises

MediaAlpha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MediaAlpha has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MediaAlpha and Grom Social

The main advantage of trading using opposite MediaAlpha and Grom Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MediaAlpha 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 MediaAlpha 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.