Correlation Between Douglas Emmett and Zillow Group

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Can any of the company-specific risk be diversified away by investing in both Douglas Emmett and Zillow 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 Douglas Emmett and Zillow Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Douglas Emmett and Zillow Group Class, you can compare the effects of market volatilities on Douglas Emmett and Zillow 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 Douglas Emmett with a short position of Zillow Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Douglas Emmett and Zillow Group.

Diversification Opportunities for Douglas Emmett and Zillow Group

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Douglas and Zillow is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and Zillow Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group Class and Douglas Emmett 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 Douglas Emmett are associated (or correlated) with Zillow Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zillow Group Class has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and Zillow Group go up and down completely randomly.

Pair Corralation between Douglas Emmett and Zillow Group

Considering the 90-day investment horizon Douglas Emmett is expected to under-perform the Zillow Group. In addition to that, Douglas Emmett is 1.09 times more volatile than Zillow Group Class. It trades about -0.02 of its total potential returns per unit of risk. Zillow Group Class is currently generating about 0.01 per unit of volatility. If you would invest  7,168  in Zillow Group Class on March 12, 2025 and sell it today you would lose (17.00) from holding Zillow Group Class or give up 0.24% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Douglas Emmett  vs.  Zillow Group Class

 Performance 
       Timeline  
Douglas Emmett 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
Zillow Group Class 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.

Douglas Emmett and Zillow Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Douglas Emmett and Zillow Group

The main advantage of trading using opposite Douglas Emmett and Zillow Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Douglas Emmett position performs unexpectedly, Zillow 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 Zillow Group will offset losses from the drop in Zillow Group's long position.
The idea behind Douglas Emmett and Zillow Group Class 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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