Correlation Between X Square and Zillow Group

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

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

Diversification Opportunities for X Square and Zillow Group

0.8

Correlation Coefficient

X Square  Zillow Group

Very poor diversification

The 3 months correlation between SQBIX and Zillow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding X Square Balanced and Zillow Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group Class and X Square 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 X Square Balanced are associated (or correlated) with Zillow Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zillow Group Class has no effect on the direction of X Square i.e., X Square and Zillow Group go up and down completely randomly.

Pair Corralation between X Square and Zillow Group

Assuming the 90 days horizon X Square Balanced is expected to generate 0.28 times more return on investment than Zillow Group. However, X Square Balanced is 3.51 times less risky than Zillow Group. It trades about -0.02 of its potential returns per unit of risk. Zillow Group Class is currently generating about -0.04 per unit of risk. If you would invest  1,389  in X Square Balanced on December 27, 2024 and sell it today you would lose (12.00) from holding X Square Balanced or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

X Square Balanced  vs.  Zillow Group Class

X Square Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days X Square Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, X Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zillow Group Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zillow Group Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Zillow Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with X Square and Zillow Group

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

The idea behind X Square Balanced and Zillow Group Class 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..