Correlation Between Hercules Capital and Walker Dunlop

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

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

Diversification Opportunities for Hercules Capital and Walker Dunlop

0.44

Correlation Coefficient

Hercules Capital  Walker Dunlop

Very weak diversification

The 3 months correlation between Hercules and Walker is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop and Hercules Capital 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 Hercules Capital are associated (or correlated) with Walker Dunlop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walker Dunlop has no effect on the direction of Hercules Capital i.e., Hercules Capital and Walker Dunlop go up and down completely randomly.

Pair Corralation between Hercules Capital and Walker Dunlop

Assuming the 90 days horizon Hercules Capital is expected to generate 0.6 times more return on investment than Walker Dunlop. However, Hercules Capital is 1.67 times less risky than Walker Dunlop. It trades about 0.06 of its potential returns per unit of risk. Walker Dunlop is currently generating about -0.02 per unit of risk. If you would invest  1,729  in Hercules Capital on September 22, 2024 and sell it today you would earn a total of  78.00  from holding Hercules Capital or generate 4.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Hercules Capital  vs.  Walker Dunlop

Hercules Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hercules Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite nearly stable basic indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hercules Capital and Walker Dunlop

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

The idea behind Hercules Capital and Walker Dunlop 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.