Correlation Between TuanChe ADR and Zillow Group

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

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

Diversification Opportunities for TuanChe ADR and Zillow Group

Poor diversification

The 3 months correlation between TuanChe and Zillow is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding TuanChe ADR 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 TuanChe ADR 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 TuanChe ADR 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 TuanChe ADR i.e., TuanChe ADR and Zillow Group go up and down completely randomly.

Pair Corralation between TuanChe ADR and Zillow Group

Allowing for the 90-day total investment horizon TuanChe ADR is expected to under-perform the Zillow Group. In addition to that, TuanChe ADR is 2.73 times more volatile than Zillow Group Class. It trades about -0.06 of its total potential returns per unit of risk. Zillow Group Class is currently generating about 0.05 per unit of volatility. If you would invest  3,050  in Zillow Group Class on September 1, 2023 and sell it today you would earn a total of  1,179  from holding Zillow Group Class or generate 38.66% return on investment over 90 days.

TuanChe ADR  vs.  Zillow Group Class

TuanChe ADR

TuanChe Performance

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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 December 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Zillow Group Class

Zillow Performance

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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 inconsistent performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in December 2023. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with TuanChe ADR and Zillow Group

The main advantage of trading using opposite TuanChe ADR and Zillow Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TuanChe ADR 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 TuanChe ADR 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 Portfolio Dashboard module to portfolio Dashboard that provides centralized access to all your investments.