Correlation Between Doma Holdings and Redfin Corp

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

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

Diversification Opportunities for Doma Holdings and Redfin Corp

0.0

Correlation Coefficient

Doma Holdings  Redfin Corp

Pay attention - limited upside

The 3 months correlation between Doma and Redfin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Doma Holdings and Redfin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redfin Corp and Doma Holdings 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 Doma Holdings are associated (or correlated) with Redfin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redfin Corp has no effect on the direction of Doma Holdings i.e., Doma Holdings and Redfin Corp go up and down completely randomly.

Pair Corralation between Doma Holdings and Redfin Corp

If you would invest  794.00  in Redfin Corp on December 28, 2024 and sell it today you would earn a total of  228.00  from holding Redfin Corp or generate 28.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Doma Holdings  vs.  Redfin Corp

Doma Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Doma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Doma Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Redfin Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Redfin Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Redfin Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doma Holdings and Redfin Corp

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

The idea behind Doma Holdings and Redfin Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.