Correlation Between EverQuote and Groupon

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Can any of the company-specific risk be diversified away by investing in both EverQuote 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 EverQuote and Groupon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EverQuote Class A and Groupon, you can compare the effects of market volatilities on EverQuote 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 EverQuote with a short position of Groupon. Check out your portfolio center. Please also check ongoing floating volatility patterns of EverQuote and Groupon.

Diversification Opportunities for EverQuote and Groupon

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between EverQuote and Groupon is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding EverQuote Class A and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and EverQuote 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 EverQuote Class A 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 EverQuote i.e., EverQuote and Groupon go up and down completely randomly.

Pair Corralation between EverQuote and Groupon

Given the investment horizon of 90 days EverQuote is expected to generate 2.11 times less return on investment than Groupon. But when comparing it to its historical volatility, EverQuote Class A is 1.4 times less risky than Groupon. It trades about 0.03 of its potential returns per unit of risk. Groupon is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  935.00  in Groupon on December 29, 2023 and sell it today you would earn a total of  347.00  from holding Groupon or generate 37.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

EverQuote Class A  vs.  Groupon

 Performance 
       Timeline  
EverQuote Class A 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in EverQuote Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, EverQuote reported solid returns over the last few months and may actually be approaching a breakup point.
Groupon 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Groupon are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Groupon may actually be approaching a critical reversion point that can send shares even higher in April 2024.

EverQuote and Groupon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EverQuote and Groupon

The main advantage of trading using opposite EverQuote and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EverQuote 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 EverQuote Class A 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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