Correlation Between Groupon and EBay

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

By analyzing existing cross correlation between Groupon and eBay Inc, you can compare the effects of market volatilities on Groupon and EBay 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 EBay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Groupon and EBay.

Diversification Opportunities for Groupon and EBay

0.34

Correlation Coefficient

Groupon  EBay

Weak diversification

The 3 months correlation between Groupon and EBay is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Groupon and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Groupon i.e., Groupon and EBay go up and down completely randomly.

Pair Corralation between Groupon and EBay

Given the investment horizon of 90 days Groupon is expected to generate 1.97 times more return on investment than EBay. However, Groupon is 1.97 times more volatile than eBay Inc. It trades about 0.08 of its potential returns per unit of risk. eBay Inc is currently generating about 0.03 per unit of risk. If you would invest  955.00  in Groupon on December 1, 2024 and sell it today you would earn a total of  157.00  from holding Groupon or generate 16.44% return on investment over 90 days.

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

Groupon  vs.  eBay Inc

Groupon

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Groupon are ranked lower than 6 (%) 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.

eBay Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, EBay is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Groupon and EBay

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

The idea behind Groupon and eBay Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.