Correlation Between TuanChe ADR and Zillow

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

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

Diversification Opportunities for TuanChe ADR and Zillow

-0.64

Correlation Coefficient

TuanChe ADR  Zillow

Excellent diversification

The 3 months correlation between TuanChe and Zillow is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding TuanChe ADR and Zillow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group and TuanChe ADR 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 TuanChe ADR are associated (or correlated) with Zillow. 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 has no effect on the direction of TuanChe ADR i.e., TuanChe ADR and Zillow go up and down completely randomly.

Pair Corralation between TuanChe ADR and Zillow

Allowing for the 90-day total investment horizon TuanChe ADR is expected to generate 2.29 times less return on investment than Zillow. But when comparing it to its historical volatility, TuanChe ADR is 1.07 times less risky than Zillow. It trades about 0.13 of its potential returns per unit of risk. Zillow Group is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  5,850  in Zillow Group on September 4, 2024 and sell it today you would earn a total of  2,214  from holding Zillow Group or generate 37.85% return on investment over 90 days.

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

TuanChe ADR  vs.  Zillow Group

TuanChe ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TuanChe ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Zillow Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Zillow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TuanChe ADR and Zillow

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

The idea behind TuanChe ADR and Zillow 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.