Correlation Between MediaAlpha and Groupon

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

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

Diversification Opportunities for MediaAlpha and Groupon

-0.45

Correlation Coefficient

MediaAlpha  Groupon

Very good diversification

The 3 months correlation between MediaAlpha and Groupon is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding MediaAlpha and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon 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 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 MediaAlpha i.e., MediaAlpha and Groupon go up and down completely randomly.

Pair Corralation between MediaAlpha and Groupon

Considering the 90-day investment horizon MediaAlpha is expected to under-perform the Groupon. But the stock apears to be less risky and, when comparing its historical volatility, MediaAlpha is 1.66 times less risky than Groupon. The stock trades about 0.0 of its potential returns per unit of risk. The Groupon is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,097  in Groupon on August 2, 2024 and sell it today you would lose (14.00) from holding Groupon or give up 1.28% of portfolio value over 90 days.

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

MediaAlpha  vs.  Groupon

MediaAlpha

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MediaAlpha are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, MediaAlpha showed solid returns over the last few months and may actually be approaching a breakup point.

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 MediaAlpha and Groupon

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

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.