Correlation Between Zillow Group and Lumen Technologies

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

Diversification Opportunities for Zillow Group and Lumen Technologies

0.76

Correlation Coefficient

Zillow Group  Lumen Technologies

Poor diversification

The 3 months correlation between Zillow and Lumen is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Zillow Group i.e., Zillow Group and Lumen Technologies go up and down completely randomly.

Pair Corralation between Zillow Group and Lumen Technologies

Taking into account the 90-day investment horizon Zillow Group Class is expected to generate 0.72 times more return on investment than Lumen Technologies. However, Zillow Group Class is 1.38 times less risky than Lumen Technologies. It trades about 0.2 of its potential returns per unit of risk. Lumen Technologies is currently generating about 0.13 per unit of risk. If you would invest  5,530  in Zillow Group Class on August 30, 2024 and sell it today you would earn a total of  3,015  from holding Zillow Group Class or generate 54.52% return on investment over 90 days.

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

Zillow Group Class  vs.  Lumen Technologies

Zillow Group Class

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group Class are ranked lower than 15 (%) 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.

Lumen Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumen Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Lumen Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zillow Group and Lumen Technologies

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

The idea behind Zillow Group Class and Lumen Technologies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.