Correlation Between CoStar and Newmark

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

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

Diversification Opportunities for CoStar and Newmark

0.26

Correlation Coefficient

CoStar  Newmark

Modest diversification

The 3 months correlation between CoStar and Newmark is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CoStar Group and Newmark Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmark Group 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 Newmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmark Group has no effect on the direction of CoStar i.e., CoStar and Newmark go up and down completely randomly.

Pair Corralation between CoStar and Newmark

Given the investment horizon of 90 days CoStar Group is expected to generate 0.73 times more return on investment than Newmark. However, CoStar Group is 1.36 times less risky than Newmark. It trades about 0.1 of its potential returns per unit of risk. Newmark Group is currently generating about -0.02 per unit of risk. If you would invest  7,182  in CoStar Group on December 29, 2024 and sell it today you would earn a total of  749.00  from holding CoStar Group or generate 10.43% return on investment over 90 days.

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

CoStar Group  vs.  Newmark Group

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 weak technical and fundamental indicators, CoStar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Newmark Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Newmark Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newmark is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CoStar and Newmark

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

The idea behind CoStar Group and Newmark Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.