Correlation Between LL Flooring and Groupon

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

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

Diversification Opportunities for LL Flooring and Groupon

0.35

Correlation Coefficient

LL Flooring  Groupon

Weak diversification

The 3 months correlation between LL Flooring and Groupon is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding LL Flooring Holdings and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and LL Flooring 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 LL Flooring Holdings 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 LL Flooring i.e., LL Flooring and Groupon go up and down completely randomly.

Pair Corralation between LL Flooring and Groupon

Allowing for the 90-day total investment horizon LL Flooring Holdings is expected to under-perform the Groupon. But the stock apears to be less risky and, when comparing its historical volatility, LL Flooring Holdings is 2.83 times less risky than Groupon. The stock trades about -0.54 of its potential returns per unit of risk. The Groupon is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,334  in Groupon on January 28, 2024 and sell it today you would lose (167.00) from holding Groupon or give up 12.52% of portfolio value over 90 days.

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

LL Flooring Holdings  vs.  Groupon

LL Flooring Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LL Flooring Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 weak 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 LL Flooring and Groupon

The main advantage of trading using opposite LL Flooring and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LL Flooring 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 LL Flooring Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.