Correlation Between Walker Dunlop and Sparta Capital

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

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

Diversification Opportunities for Walker Dunlop and Sparta Capital

0.17

Correlation Coefficient

Walker Dunlop  Sparta Capital

Average diversification

The 3 months correlation between Walker and Sparta is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and Sparta Capital go up and down completely randomly.

Pair Corralation between Walker Dunlop and Sparta Capital

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 0.56 times more return on investment than Sparta Capital. However, Walker Dunlop is 1.78 times less risky than Sparta Capital. It trades about 0.05 of its potential returns per unit of risk. Sparta Capital is currently generating about -0.13 per unit of risk. If you would invest  10,641  in Walker Dunlop on August 30, 2024 and sell it today you would earn a total of  441.00  from holding Walker Dunlop or generate 4.14% return on investment over 90 days.

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

Walker Dunlop  vs.  Sparta Capital

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.

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Walker Dunlop and Sparta Capital

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

The idea behind Walker Dunlop and Sparta Capital 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.