Correlation Between CoStar and Hysan Development

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

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

Diversification Opportunities for CoStar and Hysan Development

0.57

Correlation Coefficient

CoStar  Hysan Development

Very weak diversification

The 3 months correlation between CoStar and Hysan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CoStar Group and Hysan Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hysan Development and CoStar 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 CoStar Group are associated (or correlated) with Hysan Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hysan Development has no effect on the direction of CoStar i.e., CoStar and Hysan Development go up and down completely randomly.

Pair Corralation between CoStar and Hysan Development

Given the investment horizon of 90 days CoStar is expected to generate 1.05 times less return on investment than Hysan Development. But when comparing it to its historical volatility, CoStar Group is 1.82 times less risky than Hysan Development. It trades about 0.1 of its potential returns per unit of risk. Hysan Development Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  286.00  in Hysan Development Co on December 28, 2024 and sell it today you would earn a total of  24.00  from holding Hysan Development Co or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

CoStar Group  vs.  Hysan Development Co

CoStar Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, CoStar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hysan Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hysan Development Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hysan Development may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CoStar and Hysan Development

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

The idea behind CoStar Group and Hysan Development Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.