Correlation Between Walker Dunlop and XPLA

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

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

Diversification Opportunities for Walker Dunlop and XPLA

0.15

Correlation Coefficient

Walker Dunlop  XPLA

Average diversification

The 3 months correlation between Walker and XPLA is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Walker Dunlop and XPLA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XPLA 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 XPLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XPLA has no effect on the direction of Walker Dunlop i.e., Walker Dunlop and XPLA go up and down completely randomly.

Pair Corralation between Walker Dunlop and XPLA

Allowing for the 90-day total investment horizon Walker Dunlop is expected to generate 1.33 times less return on investment than XPLA. But when comparing it to its historical volatility, Walker Dunlop is 1.9 times less risky than XPLA. It trades about 0.05 of its potential returns per unit of risk. XPLA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9.51  in XPLA on August 30, 2024 and sell it today you would earn a total of  0.34  from holding XPLA or generate 3.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Walker Dunlop  vs.  XPLA

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.

XPLA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XPLA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, XPLA may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Walker Dunlop and XPLA

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

The idea behind Walker Dunlop and XPLA 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.