Correlation Between Far East and Walker Dunlop

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

By analyzing existing cross correlation between Far East Horizon and Walker Dunlop, you can compare the effects of market volatilities on Far East and Walker Dunlop 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 Far East with a short position of Walker Dunlop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far East and Walker Dunlop.

Diversification Opportunities for Far East and Walker Dunlop

0.75

Correlation Coefficient

Far East  Walker Dunlop

Poor diversification

The 3 months correlation between Far and Walker is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Far East Horizon and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop and Far East 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 Far East Horizon are associated (or correlated) with Walker Dunlop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walker Dunlop has no effect on the direction of Far East i.e., Far East and Walker Dunlop go up and down completely randomly.

Pair Corralation between Far East and Walker Dunlop

Assuming the 90 days horizon Far East Horizon is expected to generate 1.4 times more return on investment than Walker Dunlop. However, Far East is 1.4 times more volatile than Walker Dunlop. It trades about 0.14 of its potential returns per unit of risk. Walker Dunlop is currently generating about 0.15 per unit of risk. If you would invest  55.00  in Far East Horizon on September 3, 2024 and sell it today you would earn a total of  4.00  from holding Far East Horizon or generate 7.27% return on investment over 90 days.

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

Far East Horizon  vs.  Walker Dunlop

Far East Horizon

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Far East Horizon are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Far East reported solid returns over the last few months and may actually be approaching a breakup point.

Walker Dunlop

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Far East and Walker Dunlop

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

The idea behind Far East Horizon and Walker Dunlop 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.