Correlation Between Rossi Residencial and CoStar

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

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

Diversification Opportunities for Rossi Residencial and CoStar

0.28

Correlation Coefficient

Rossi Residencial  CoStar

Modest diversification

The 3 months correlation between Rossi and CoStar is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Rossi Residencial SA and CoStar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoStar Group and Rossi Residencial 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 Rossi Residencial SA are associated (or correlated) with CoStar. 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 has no effect on the direction of Rossi Residencial i.e., Rossi Residencial and CoStar go up and down completely randomly.

Pair Corralation between Rossi Residencial and CoStar

Assuming the 90 days trading horizon Rossi Residencial SA is expected to under-perform the CoStar. In addition to that, Rossi Residencial is 1.75 times more volatile than CoStar Group. It trades about -0.01 of its total potential returns per unit of risk. CoStar Group is currently generating about -0.02 per unit of volatility. If you would invest  451.00  in CoStar Group on December 5, 2024 and sell it today you would lose (14.00) from holding CoStar Group or give up 3.1% of portfolio value over 90 days.

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

Rossi Residencial SA  vs.  CoStar Group

Rossi Residencial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rossi Residencial SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rossi Residencial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CoStar Group

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rossi Residencial and CoStar

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

The idea behind Rossi Residencial SA and CoStar 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.