Correlation Between Walker Dunlop and Industrial Commercial

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

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

Diversification Opportunities for Walker Dunlop and Industrial Commercial

0.64

Correlation Coefficient

Walker Dunlop  Industrial Commercial

Poor diversification

The 3 months correlation between Walker and Industrial is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Industrial Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Commercial and Walker Dunlop 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 Walker Dunlop are associated (or correlated) with Industrial Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Commercial has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Industrial Commercial go up and down completely randomly.

Pair Corralation between Walker Dunlop and Industrial Commercial

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 3.12 times less return on investment than Industrial Commercial. But when comparing it to its historical volatility, Walker Dunlop is 1.42 times less risky than Industrial Commercial. It trades about 0.04 of its potential returns per unit of risk. Industrial Commercial Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,083  in Industrial Commercial Bank on September 4, 2024 and sell it today you would earn a total of  125.00  from holding Industrial Commercial Bank or generate 11.54% return on investment over 90 days.

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

Walker Dunlop  vs.  Industrial Commercial Bank

Walker Dunlop

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Industrial Commercial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial Commercial Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Industrial Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walker Dunlop and Industrial Commercial

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

The idea behind Walker Dunlop and Industrial Commercial Bank 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.