Correlation Between Zillow and Marcus Millichap

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

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

Diversification Opportunities for Zillow and Marcus Millichap

0.72

Correlation Coefficient

Zillow  Marcus Millichap

Poor diversification

The 3 months correlation between Zillow and Marcus is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group and Marcus Millichap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marcus Millichap and Zillow 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 are associated (or correlated) with Marcus Millichap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marcus Millichap has no effect on the direction of Zillow i.e., Zillow and Marcus Millichap go up and down completely randomly.

Pair Corralation between Zillow and Marcus Millichap

Allowing for the 90-day total investment horizon Zillow Group is expected to generate 2.24 times more return on investment than Marcus Millichap. However, Zillow is 2.24 times more volatile than Marcus Millichap. It trades about 0.2 of its potential returns per unit of risk. Marcus Millichap is currently generating about 0.09 per unit of risk. If you would invest  5,224  in Zillow Group on August 31, 2024 and sell it today you would earn a total of  3,009  from holding Zillow Group or generate 57.6% return on investment over 90 days.

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

Zillow Group  vs.  Marcus Millichap

Zillow Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group are ranked lower than 16 (%) 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.

Marcus Millichap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marcus Millichap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating primary indicators, Marcus Millichap may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Zillow and Marcus Millichap

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

The idea behind Zillow Group and Marcus Millichap 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.