Correlation Between American International and Groupon

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

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

Diversification Opportunities for American International and Groupon

-0.11

Correlation Coefficient

American International  Groupon

Good diversification

The 3 months correlation between American and Groupon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and American International 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 American International Group 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 American International i.e., American International and Groupon go up and down completely randomly.

Pair Corralation between American International and Groupon

Considering the 90-day investment horizon American International Group is expected to generate 0.25 times more return on investment than Groupon. However, American International Group is 4.0 times less risky than Groupon. It trades about -0.01 of its potential returns per unit of risk. Groupon is currently generating about -0.05 per unit of risk. If you would invest  7,627  in American International Group on September 4, 2024 and sell it today you would lose (117.00) from holding American International Group or give up 1.53% of portfolio value over 90 days.

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

American International Group  vs.  Groupon

American International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, American International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with American International and Groupon

The main advantage of trading using opposite American International and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International 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 American International Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.