Correlation Between Redfin Corp and Doma Holdings

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

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

Diversification Opportunities for Redfin Corp and Doma Holdings

-0.2

Correlation Coefficient

Redfin Corp  Doma Holdings

Good diversification

The 3 months correlation between Redfin and Doma is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Redfin Corp and Doma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doma Holdings and Redfin Corp 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 Redfin Corp are associated (or correlated) with Doma Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doma Holdings has no effect on the direction of Redfin Corp i.e., Redfin Corp and Doma Holdings go up and down completely randomly.

Pair Corralation between Redfin Corp and Doma Holdings

Given the investment horizon of 90 days Redfin Corp is expected to generate 11.83 times more return on investment than Doma Holdings. However, Redfin Corp is 11.83 times more volatile than Doma Holdings. It trades about 0.07 of its potential returns per unit of risk. Doma Holdings is currently generating about 0.29 per unit of risk. If you would invest  746.00  in Redfin Corp on August 16, 2024 and sell it today you would earn a total of  133.00  from holding Redfin Corp or generate 17.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	47.62%
Values	Daily Returns

Redfin Corp  vs.  Doma Holdings

Redfin Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Redfin Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Redfin Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Doma Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Doma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain primary indicators, Doma Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Redfin Corp and Doma Holdings

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

The idea behind Redfin Corp and Doma Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.