Correlation Between CoStar and Re Max

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

By analyzing existing cross correlation between CoStar Group and Re Max Holding, you can compare the effects of market volatilities on CoStar and Re Max 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 Re Max. Check out your portfolio center. Please also check ongoing floating volatility patterns of CoStar and Re Max.

Diversification Opportunities for CoStar and Re Max

0.29

Correlation Coefficient

CoStar  Re Max

Modest diversification

The 3 months correlation between CoStar and RMAX is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CoStar Group and Re Max Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Re Max Holding 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 Re Max. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Re Max Holding has no effect on the direction of CoStar i.e., CoStar and Re Max go up and down completely randomly.

Pair Corralation between CoStar and Re Max

Given the investment horizon of 90 days CoStar is expected to generate 2.51 times less return on investment than Re Max. But when comparing it to its historical volatility, CoStar Group is 2.0 times less risky than Re Max. It trades about 0.07 of its potential returns per unit of risk. Re Max Holding is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,124  in Re Max Holding on September 3, 2024 and sell it today you would earn a total of  192.00  from holding Re Max Holding or generate 17.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CoStar Group  vs.  Re Max Holding

CoStar Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, CoStar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Re Max Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Re Max Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Re Max showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CoStar and Re Max

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

The idea behind CoStar Group and Re Max Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.