Correlation Between Zillow Group and IAC

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

Diversification Opportunities for Zillow Group and IAC

0.57

Correlation Coefficient

Zillow Group  IAC

Very weak diversification

The 3 months correlation between Zillow and IAC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group Class and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc 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 IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of Zillow Group i.e., Zillow Group and IAC go up and down completely randomly.

Pair Corralation between Zillow Group and IAC

Taking into account the 90-day investment horizon Zillow Group Class is expected to under-perform the IAC. In addition to that, Zillow Group is 1.36 times more volatile than IAC Inc. It trades about -0.23 of its total potential returns per unit of risk. IAC Inc is currently generating about -0.28 per unit of volatility. If you would invest  5,343  in IAC Inc on January 30, 2024 and sell it today you would lose (454.00) from holding IAC Inc or give up 8.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Zillow Group Class  vs.  IAC Inc

Zillow Group Class

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

IAC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IAC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zillow Group and IAC

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

The idea behind Zillow Group Class and IAC Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.