Correlation Between Birks and Groupon

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

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

Diversification Opportunities for Birks and Groupon

-0.41

Correlation Coefficient

Birks  Groupon

Very good diversification

The 3 months correlation between Birks and Groupon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Birks Group and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and Birks 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 Birks 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 Birks i.e., Birks and Groupon go up and down completely randomly.

Pair Corralation between Birks and Groupon

Considering the 90-day investment horizon Birks Group is expected to under-perform the Groupon. But the stock apears to be less risky and, when comparing its historical volatility, Birks Group is 1.26 times less risky than Groupon. The stock trades about -0.05 of its potential returns per unit of risk. The Groupon is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,208  in Groupon on December 28, 2024 and sell it today you would earn a total of  674.00  from holding Groupon or generate 55.79% return on investment over 90 days.

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

Birks Group  vs.  Groupon

Birks Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Birks Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Groupon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Groupon are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Groupon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Birks and Groupon

The main advantage of trading using opposite Birks and Groupon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Birks 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 Birks 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.