Correlation Between CBRE Group and COSTAR GROUP

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

By analyzing existing cross correlation between CBRE Group Class and COSTAR GROUP INC, you can compare the effects of market volatilities on CBRE Group and COSTAR GROUP 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 CBRE Group with a short position of COSTAR GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of CBRE Group and COSTAR GROUP.

Diversification Opportunities for CBRE Group and COSTAR GROUP

0.64

Correlation Coefficient

CBRE Group  COSTAR GROUP

Poor diversification

The 3 months correlation between CBRE and COSTAR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CBRE Group Class and COSTAR GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTAR GROUP INC and CBRE Group 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 CBRE Group Class are associated (or correlated) with COSTAR GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTAR GROUP INC has no effect on the direction of CBRE Group i.e., CBRE Group and COSTAR GROUP go up and down completely randomly.

Pair Corralation between CBRE Group and COSTAR GROUP

Assuming the 90 days horizon CBRE Group Class is expected to generate 0.9 times more return on investment than COSTAR GROUP. However, CBRE Group Class is 1.11 times less risky than COSTAR GROUP. It trades about -0.12 of its potential returns per unit of risk. COSTAR GROUP INC is currently generating about -0.15 per unit of risk. If you would invest  12,900  in CBRE Group Class on October 11, 2024 and sell it today you would lose (500.00) from holding CBRE Group Class or give up 3.88% of portfolio value over 90 days.

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

CBRE Group Class  vs.  COSTAR GROUP INC

CBRE Group Class

Risk-Adjusted Performance

9 of 100

OK

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

COSTAR GROUP INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COSTAR GROUP INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTAR GROUP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CBRE Group and COSTAR GROUP

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

The idea behind CBRE Group Class and COSTAR GROUP INC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.