Correlation Between Zillow Group and TuanChe ADR

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

Diversification Opportunities for Zillow Group and TuanChe ADR

0.33

Correlation Coefficient

Zillow Group  TuanChe ADR

Weak diversification

The 3 months correlation between Zillow and TuanChe is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and TuanChe ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TuanChe ADR 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 TuanChe ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TuanChe ADR has no effect on the direction of Zillow Group i.e., Zillow Group and TuanChe ADR go up and down completely randomly.

Pair Corralation between Zillow Group and TuanChe ADR

Taking into account the 90-day investment horizon Zillow Group Class is expected to generate 0.5 times more return on investment than TuanChe ADR. However, Zillow Group Class is 1.99 times less risky than TuanChe ADR. It trades about -0.03 of its potential returns per unit of risk. TuanChe ADR is currently generating about -0.09 per unit of risk. If you would invest  7,618  in Zillow Group Class on December 27, 2024 and sell it today you would lose (466.00) from holding Zillow Group Class or give up 6.12% of portfolio value over 90 days.

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

Zillow Group Class  vs.  TuanChe ADR

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.

TuanChe ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days TuanChe ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Zillow Group and TuanChe ADR

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

The idea behind Zillow Group Class and TuanChe ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.