Correlation Between Zillow and Outbrain

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

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

Diversification Opportunities for Zillow and Outbrain

0.68

Correlation Coefficient

Zillow  Outbrain

Poor diversification

The 3 months correlation between Zillow and Outbrain is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group and Outbrain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Outbrain 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 Outbrain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Outbrain has no effect on the direction of Zillow i.e., Zillow and Outbrain go up and down completely randomly.

Pair Corralation between Zillow and Outbrain

Allowing for the 90-day total investment horizon Zillow Group is expected to generate 1.6 times more return on investment than Outbrain. However, Zillow is 1.6 times more volatile than Outbrain. It trades about 0.2 of its potential returns per unit of risk. Outbrain is currently generating about 0.07 per unit of risk. If you would invest  5,207  in Zillow Group on September 4, 2024 and sell it today you would earn a total of  2,857  from holding Zillow Group or generate 54.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Zillow Group  vs.  Outbrain

Zillow Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zillow Group are ranked lower than 15 (%) 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.

Outbrain

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Outbrain are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Outbrain may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zillow and Outbrain

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

The idea behind Zillow Group and Outbrain 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.