Correlation Between Financial Institutions and Walker Dunlop

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

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

Diversification Opportunities for Financial Institutions and Walker Dunlop

-0.39

Correlation Coefficient

Financial Institutions  Walker Dunlop

Very good diversification

The 3 months correlation between Financial and Walker is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Financial Institutions and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop and Financial Institutions 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 Financial Institutions 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 Financial Institutions i.e., Financial Institutions and Walker Dunlop go up and down completely randomly.

Pair Corralation between Financial Institutions and Walker Dunlop

Given the investment horizon of 90 days Financial Institutions is expected to generate 1.12 times more return on investment than Walker Dunlop. However, Financial Institutions is 1.12 times more volatile than Walker Dunlop. It trades about 0.04 of its potential returns per unit of risk. Walker Dunlop is currently generating about 0.04 per unit of risk. If you would invest  1,889  in Financial Institutions on October 5, 2024 and sell it today you would earn a total of  796.00  from holding Financial Institutions or generate 42.14% return on investment over 90 days.

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

Financial Institutions  vs.  Walker Dunlop

Financial Institutions

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Institutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Financial Institutions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Financial Institutions and Walker Dunlop

The main advantage of trading using opposite Financial Institutions and Walker Dunlop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Institutions 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 Financial Institutions 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.