Correlation Between Group 1 and Contextlogic

Can any of the company-specific risk be diversified away by investing in both Group 1 and Contextlogic 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 Group 1 and Contextlogic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Group 1 Automotive and Contextlogic, you can compare the effects of market volatilities on Group 1 and Contextlogic 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 Group 1 with a short position of Contextlogic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and Contextlogic.

Diversification Opportunities for Group 1 and Contextlogic

0.58

Correlation Coefficient

Group 1  Contextlogic

Very weak diversification

The 3 months correlation between Group and Contextlogic is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and Contextlogic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contextlogic and Group 1 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 Group 1 Automotive are associated (or correlated) with Contextlogic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contextlogic has no effect on the direction of Group 1 i.e., Group 1 and Contextlogic go up and down completely randomly.

Pair Corralation between Group 1 and Contextlogic

Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.78 times more return on investment than Contextlogic. However, Group 1 Automotive is 1.29 times less risky than Contextlogic. It trades about 0.22 of its potential returns per unit of risk. Contextlogic is currently generating about 0.06 per unit of risk. If you would invest  35,246  in Group 1 Automotive on October 26, 2024 and sell it today you would earn a total of  9,709  from holding Group 1 Automotive or generate 27.55% return on investment over 90 days.

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

Group 1 Automotive  vs.  Contextlogic

Group 1 Automotive

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Group 1 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Contextlogic

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Contextlogic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Contextlogic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Group 1 and Contextlogic

The main advantage of trading using opposite Group 1 and Contextlogic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, Contextlogic 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 Contextlogic will offset losses from the drop in Contextlogic's long position.

The idea behind Group 1 Automotive and Contextlogic 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.