Correlation Between Better Home and Loandepot

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

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

Diversification Opportunities for Better Home and Loandepot

0.15

Correlation Coefficient

Better Home  Loandepot

Average diversification

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

Pair Corralation between Better Home and Loandepot

Assuming the 90 days horizon Better Home Finance is expected to generate 5.86 times more return on investment than Loandepot. However, Better Home is 5.86 times more volatile than Loandepot. It trades about 0.09 of its potential returns per unit of risk. Loandepot is currently generating about -0.18 per unit of risk. If you would invest  10.00  in Better Home Finance on December 27, 2024 and sell it today you would lose (0.34) from holding Better Home Finance or give up 3.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.0%
Values	Daily Returns

Better Home Finance  vs.  Loandepot

Better Home Finance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Better Home Finance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Better Home showed solid returns over the last few months and may actually be approaching a breakup point.

Loandepot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loandepot 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 fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Better Home and Loandepot

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

The idea behind Better Home Finance and Loandepot 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.