Correlation Between Warby Parker and Groupon

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

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

Diversification Opportunities for Warby Parker and Groupon

-0.68

Correlation Coefficient

Warby Parker  Groupon

Excellent diversification

The 3 months correlation between Warby and Groupon is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Warby Parker and Groupon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groupon and Warby Parker 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 Warby Parker 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 Warby Parker i.e., Warby Parker and Groupon go up and down completely randomly.

Pair Corralation between Warby Parker and Groupon

Given the investment horizon of 90 days Warby Parker is expected to under-perform the Groupon. But the stock apears to be less risky and, when comparing its historical volatility, Warby Parker is 1.81 times less risky than Groupon. The stock trades about -0.1 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 29, 2024 and sell it today you would earn a total of  675.00  from holding Groupon or generate 55.88% return on investment over 90 days.

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

Warby Parker  vs.  Groupon

Warby Parker

Risk-Adjusted Performance

Very Weak

Over the last 90 days Warby Parker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Warby Parker and Groupon

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