Correlation Between Groupon and Spark Networks

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

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

Diversification Opportunities for Groupon and Spark Networks

0.65

Correlation Coefficient

Groupon  Spark Networks

Poor diversification

The 3 months correlation between Groupon and Spark is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and Spark Networks SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spark Networks SE and Groupon 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 Groupon are associated (or correlated) with Spark Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spark Networks SE has no effect on the direction of Groupon i.e., Groupon and Spark Networks go up and down completely randomly.

Pair Corralation between Groupon and Spark Networks

Given the investment horizon of 90 days Groupon is expected to generate 0.52 times more return on investment than Spark Networks. However, Groupon is 1.94 times less risky than Spark Networks. It trades about 0.02 of its potential returns per unit of risk. Spark Networks SE is currently generating about -0.05 per unit of risk. If you would invest  1,566  in Groupon on January 27, 2024 and sell it today you would lose (419.00) from holding Groupon or give up 26.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.13%
Values	Daily Returns

Groupon  vs.  Spark Networks SE

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 latest unsteady 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.

Spark Networks SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spark Networks SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Spark Networks is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Groupon and Spark Networks

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

The idea behind Groupon and Spark Networks SE 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.