Correlation Between Phoenix New and Groupon

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

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

Diversification Opportunities for Phoenix New and Groupon

-0.36

Correlation Coefficient

Phoenix New  Groupon

Very good diversification

The 3 months correlation between Phoenix and Groupon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Phoenix New Media and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and Phoenix New 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 Phoenix New Media 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 Phoenix New i.e., Phoenix New and Groupon go up and down completely randomly.

Pair Corralation between Phoenix New and Groupon

Given the investment horizon of 90 days Phoenix New Media is expected to generate 1.32 times more return on investment than Groupon. However, Phoenix New is 1.32 times more volatile than Groupon. It trades about 0.14 of its potential returns per unit of risk. Groupon is currently generating about -0.46 per unit of risk. If you would invest  164.00  in Phoenix New Media on January 20, 2024 and sell it today you would earn a total of  24.00  from holding Phoenix New Media or generate 14.63% return on investment over 90 days.

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

Phoenix New Media  vs.  Groupon

Phoenix New Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phoenix New Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Phoenix New reported 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 Phoenix New and Groupon

The main advantage of trading using opposite Phoenix New and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phoenix New 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 Phoenix New Media 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.