Correlation Between Zillow Group and BSDE

Can any of the company-specific risk be diversified away by investing in both Zillow Group and BSDE 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 BSDE 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 BSDE, you can compare the effects of market volatilities on Zillow Group and BSDE 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 BSDE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zillow Group and BSDE.

Diversification Opportunities for Zillow Group and BSDE

0.34

Correlation Coefficient

Zillow Group  BSDE

Weak diversification

The 3 months correlation between Zillow and BSDE is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and BSDE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSDE 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 BSDE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSDE has no effect on the direction of Zillow Group i.e., Zillow Group and BSDE go up and down completely randomly.

Pair Corralation between Zillow Group and BSDE

Taking into account the 90-day investment horizon Zillow Group is expected to generate 37.47 times less return on investment than BSDE. But when comparing it to its historical volatility, Zillow Group Class is 30.34 times less risky than BSDE. It trades about 0.08 of its potential returns per unit of risk. BSDE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,384  in BSDE on September 14, 2024 and sell it today you would earn a total of  107,116  from holding BSDE or generate 4493.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.09%
Values	Daily Returns

Zillow Group Class  vs.  BSDE

Zillow Group Class

Risk-Adjusted Performance

9 of 100

OK

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

BSDE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BSDE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BSDE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zillow Group and BSDE

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

The idea behind Zillow Group Class and BSDE 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .