Correlation Between Snap and Zillow

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

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

Diversification Opportunities for Snap and Zillow

0.39

Correlation Coefficient

Snap  Zillow

Weak diversification

The 3 months correlation between Snap and Zillow is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Zillow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zillow Group and Snap 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 Snap Inc are associated (or correlated) with Zillow. 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 has no effect on the direction of Snap i.e., Snap and Zillow go up and down completely randomly.

Pair Corralation between Snap and Zillow

Given the investment horizon of 90 days Snap is expected to generate 2.08 times less return on investment than Zillow. But when comparing it to its historical volatility, Snap Inc is 1.16 times less risky than Zillow. It trades about 0.04 of its potential returns per unit of risk. Zillow Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,353  in Zillow Group on September 26, 2024 and sell it today you would earn a total of  985.00  from holding Zillow Group or generate 15.5% return on investment over 90 days.

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

Snap Inc  vs.  Zillow Group

Snap Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Snap Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Snap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Zillow Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Zillow reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Snap and Zillow

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

The idea behind Snap Inc and Zillow Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.