Correlation Between Zillow Group and First Trust

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

Diversification Opportunities for Zillow Group and First Trust

0.46

Correlation Coefficient

Zillow Group  First Trust

Very weak diversification

The 3 months correlation between Zillow and First is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NASDAQ has no effect on the direction of Zillow Group i.e., Zillow Group and First Trust go up and down completely randomly.

Pair Corralation between Zillow Group and First Trust

Taking into account the 90-day investment horizon Zillow Group Class is expected to generate 1.39 times more return on investment than First Trust. However, Zillow Group is 1.39 times more volatile than First Trust NASDAQ. It trades about 0.05 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about -0.03 per unit of risk. If you would invest  4,345  in Zillow Group Class on October 4, 2024 and sell it today you would earn a total of  2,969  from holding Zillow Group Class or generate 68.33% return on investment over 90 days.

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

Zillow Group Class  vs.  First Trust NASDAQ

Zillow Group Class

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group Class are ranked lower than 6 (%) 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.

First Trust NASDAQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Zillow Group and First Trust

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

The idea behind Zillow Group Class and First Trust NASDAQ 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.