Correlation Between CoStar and Vonovia SE

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

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

Diversification Opportunities for CoStar and Vonovia SE

-0.23

Correlation Coefficient

CoStar  Vonovia SE

Very good diversification

The 3 months correlation between CoStar and Vonovia is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding CoStar Group and Vonovia SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia SE and CoStar 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 CoStar Group are associated (or correlated) with Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE has no effect on the direction of CoStar i.e., CoStar and Vonovia SE go up and down completely randomly.

Pair Corralation between CoStar and Vonovia SE

Given the investment horizon of 90 days CoStar is expected to generate 5.25 times less return on investment than Vonovia SE. But when comparing it to its historical volatility, CoStar Group is 1.78 times less risky than Vonovia SE. It trades about 0.02 of its potential returns per unit of risk. Vonovia SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,168  in Vonovia SE on January 24, 2024 and sell it today you would earn a total of  575.00  from holding Vonovia SE or generate 26.52% return on investment over 90 days.

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

CoStar Group  vs.  Vonovia SE

CoStar Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, CoStar is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vonovia SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vonovia SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Vonovia SE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CoStar and Vonovia SE

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

The idea behind CoStar Group and Vonovia SE 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.