Correlation Between Zillow Group and Arena Group

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

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

Diversification Opportunities for Zillow Group and Arena Group

-0.1

Correlation Coefficient

Zillow Group  Arena Group

Good diversification

The 3 months correlation between Zillow and Arena is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and Arena Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Group Holdings and Zillow 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 Zillow Group Class are associated (or correlated) with Arena Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Group Holdings has no effect on the direction of Zillow Group i.e., Zillow Group and Arena Group go up and down completely randomly.

Pair Corralation between Zillow Group and Arena Group

Taking into account the 90-day investment horizon Zillow Group Class is expected to under-perform the Arena Group. But the etf apears to be less risky and, when comparing its historical volatility, Zillow Group Class is 2.13 times less risky than Arena Group. The etf trades about -0.03 of its potential returns per unit of risk. The Arena Group Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Arena Group Holdings on December 27, 2024 and sell it today you would earn a total of  34.00  from holding Arena Group Holdings or generate 24.64% return on investment over 90 days.

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

Zillow Group Class  vs.  Arena Group Holdings

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.

Arena Group Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Group Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Arena Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zillow Group and Arena Group

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

The idea behind Zillow Group Class and Arena Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.