Correlation Between Zillow Group and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Zillow Group and SPDR SP 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 SPDR SP 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 SPDR SP 500, you can compare the effects of market volatilities on Zillow Group and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zillow Group and SPDR SP.

Diversification Opportunities for Zillow Group and SPDR SP

0.8

Correlation Coefficient

Zillow Group  SPDR SP

Very poor diversification

The 3 months correlation between Zillow and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Zillow Group i.e., Zillow Group and SPDR SP go up and down completely randomly.

Pair Corralation between Zillow Group and SPDR SP

Taking into account the 90-day investment horizon Zillow Group Class is expected to generate 2.46 times more return on investment than SPDR SP. However, Zillow Group is 2.46 times more volatile than SPDR SP 500. It trades about -0.02 of its potential returns per unit of risk. SPDR SP 500 is currently generating about -0.06 per unit of risk. If you would invest  7,699  in Zillow Group Class on December 26, 2024 and sell it today you would lose (343.00) from holding Zillow Group Class or give up 4.46% of portfolio value over 90 days.

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

Zillow Group Class  vs.  SPDR SP 500

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.

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SPDR SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zillow Group and SPDR SP

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

The idea behind Zillow Group Class and SPDR SP 500 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.