Correlation Between Douglas Elliman and EXp World

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

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

Diversification Opportunities for Douglas Elliman and EXp World

0.35

Correlation Coefficient

Douglas Elliman  EXp World

Weak diversification

The 3 months correlation between Douglas and EXp is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Elliman and eXp World Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eXp World Holdings and Douglas Elliman 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 Douglas Elliman are associated (or correlated) with EXp World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eXp World Holdings has no effect on the direction of Douglas Elliman i.e., Douglas Elliman and EXp World go up and down completely randomly.

Pair Corralation between Douglas Elliman and EXp World

Given the investment horizon of 90 days Douglas Elliman is expected to generate 1.68 times more return on investment than EXp World. However, Douglas Elliman is 1.68 times more volatile than eXp World Holdings. It trades about 0.12 of its potential returns per unit of risk. eXp World Holdings is currently generating about 0.11 per unit of risk. If you would invest  178.00  in Douglas Elliman on August 30, 2024 and sell it today you would earn a total of  60.00  from holding Douglas Elliman or generate 33.71% return on investment over 90 days.

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

Douglas Elliman  vs.  eXp World Holdings

Douglas Elliman

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Elliman are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Douglas Elliman reported solid returns over the last few months and may actually be approaching a breakup point.

eXp World Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eXp World Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, EXp World demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Douglas Elliman and EXp World

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

The idea behind Douglas Elliman and eXp World Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.