Correlation Between Zillow and Gaucho Group

Can any of the company-specific risk be diversified away by investing in both Zillow and Gaucho Group 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 and Gaucho Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zillow Group and Gaucho Group Holdings, you can compare the effects of market volatilities on Zillow and Gaucho Group 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 with a short position of Gaucho Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zillow and Gaucho Group.

Diversification Opportunities for Zillow and Gaucho Group

-0.35

Correlation Coefficient

Zillow  Gaucho Group

Very good diversification

The 3 months correlation between Zillow and Gaucho is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group and Gaucho Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaucho Group Holdings and Zillow 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 are associated (or correlated) with Gaucho Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaucho Group Holdings has no effect on the direction of Zillow i.e., Zillow and Gaucho Group go up and down completely randomly.

Pair Corralation between Zillow and Gaucho Group

Allowing for the 90-day total investment horizon Zillow Group is expected to generate 0.44 times more return on investment than Gaucho Group. However, Zillow Group is 2.29 times less risky than Gaucho Group. It trades about 0.13 of its potential returns per unit of risk. Gaucho Group Holdings is currently generating about -0.15 per unit of risk. If you would invest  4,418  in Zillow Group on September 29, 2024 and sell it today you would earn a total of  2,948  from holding Zillow Group or generate 66.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.54%
Values	Daily Returns

Zillow Group  vs.  Gaucho Group Holdings

Zillow Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Zillow reported solid returns over the last few months and may actually be approaching a breakup point.

Gaucho Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaucho Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Zillow and Gaucho Group

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

The idea behind Zillow Group and Gaucho Group Holdings 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.