Correlation Between Walker Dunlop and Financial Industries

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

By analyzing existing cross correlation between Walker Dunlop and Financial Industries Fund, you can compare the effects of market volatilities on Walker Dunlop and Financial Industries 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 Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walker Dunlop and Financial Industries.

Diversification Opportunities for Walker Dunlop and Financial Industries

0.24

Correlation Coefficient

Walker Dunlop  Financial Industries

Modest diversification

The 3 months correlation between Walker and Financial is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries 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 Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Financial Industries go up and down completely randomly.

Pair Corralation between Walker Dunlop and Financial Industries

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 2.0 times more return on investment than Financial Industries. However, Walker Dunlop is 2.0 times more volatile than Financial Industries Fund. It trades about 0.04 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.07 per unit of risk. If you would invest  7,967  in Walker Dunlop on September 3, 2024 and sell it today you would earn a total of  3,051  from holding Walker Dunlop or generate 38.3% return on investment over 90 days.

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

Walker Dunlop  vs.  Financial Industries Fund

Walker Dunlop

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walker Dunlop are ranked lower than 4 (%) 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.

Financial Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Financial Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walker Dunlop and Financial Industries

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

The idea behind Walker Dunlop and Financial Industries Fund 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..