Correlation Between Zillow and Sphere Entertainment

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

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

Diversification Opportunities for Zillow and Sphere Entertainment

-0.71

Correlation Coefficient

Zillow  Sphere Entertainment

Pay attention - limited upside

The 3 months correlation between Zillow and Sphere is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Zillow Group and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Zillow i.e., Zillow and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Zillow and Sphere Entertainment

Allowing for the 90-day total investment horizon Zillow Group is expected to under-perform the Sphere Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Zillow Group is 1.24 times less risky than Sphere Entertainment. The stock trades about -0.17 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,104  in Sphere Entertainment Co on September 22, 2024 and sell it today you would lose (234.00) from holding Sphere Entertainment Co or give up 5.7% of portfolio value over 90 days.

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

Zillow Group  vs.  Sphere Entertainment Co

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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Zillow and Sphere Entertainment

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

The idea behind Zillow Group and Sphere Entertainment Co 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.