Correlation Between Walker Dunlop and Oaktree Specialty

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

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

Diversification Opportunities for Walker Dunlop and Oaktree Specialty

0.63

Correlation Coefficient

Walker Dunlop  Oaktree Specialty

Poor diversification

The 3 months correlation between Walker and Oaktree is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Oaktree Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Specialty Lending 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 Oaktree Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Specialty Lending has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Oaktree Specialty go up and down completely randomly.

Pair Corralation between Walker Dunlop and Oaktree Specialty

Allowing for the 90-day total investment horizon Walker Dunlop is expected to under-perform the Oaktree Specialty. In addition to that, Walker Dunlop is 1.84 times more volatile than Oaktree Specialty Lending. It trades about -0.29 of its total potential returns per unit of risk. Oaktree Specialty Lending is currently generating about -0.07 per unit of volatility. If you would invest  1,545  in Oaktree Specialty Lending on September 27, 2024 and sell it today you would lose (24.00) from holding Oaktree Specialty Lending or give up 1.55% of portfolio value over 90 days.

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

Walker Dunlop  vs.  Oaktree Specialty Lending

Walker Dunlop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walker Dunlop has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Oaktree Specialty Lending

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Specialty Lending has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Oaktree Specialty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Walker Dunlop and Oaktree Specialty

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

The idea behind Walker Dunlop and Oaktree Specialty Lending 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.