Correlation Between Rocket Companies and Guild Holdings

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

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

Diversification Opportunities for Rocket Companies and Guild Holdings

0.89

Correlation Coefficient

Rocket Companies  Guild Holdings

Very poor diversification

The 3 months correlation between Rocket and Guild is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Companies and Guild Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guild Holdings and Rocket Companies 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 Rocket Companies are associated (or correlated) with Guild Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guild Holdings has no effect on the direction of Rocket Companies i.e., Rocket Companies and Guild Holdings go up and down completely randomly.

Pair Corralation between Rocket Companies and Guild Holdings

Considering the 90-day investment horizon Rocket Companies is expected to under-perform the Guild Holdings. In addition to that, Rocket Companies is 1.5 times more volatile than Guild Holdings Co. It trades about -0.17 of its total potential returns per unit of risk. Guild Holdings Co is currently generating about -0.15 per unit of volatility. If you would invest  1,631  in Guild Holdings Co on August 31, 2024 and sell it today you would lose (272.00) from holding Guild Holdings Co or give up 16.68% of portfolio value over 90 days.

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

Rocket Companies  vs.  Guild Holdings Co

Rocket Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocket Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward-looking signals remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Guild Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guild Holdings Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Rocket Companies and Guild Holdings

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

The idea behind Rocket Companies and Guild Holdings 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.