Correlation Between Guild Holdings and Velocity Financial

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

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

Diversification Opportunities for Guild Holdings and Velocity Financial

0.54

Correlation Coefficient

Guild Holdings  Velocity Financial

Very weak diversification

The 3 months correlation between Guild and Velocity is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Guild Holdings Co and Velocity Financial Llc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velocity Financial Llc and Guild Holdings 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 Guild Holdings Co are associated (or correlated) with Velocity Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velocity Financial Llc has no effect on the direction of Guild Holdings i.e., Guild Holdings and Velocity Financial go up and down completely randomly.

Pair Corralation between Guild Holdings and Velocity Financial

Given the investment horizon of 90 days Guild Holdings Co is expected to generate 2.06 times more return on investment than Velocity Financial. However, Guild Holdings is 2.06 times more volatile than Velocity Financial Llc. It trades about 0.01 of its potential returns per unit of risk. Velocity Financial Llc is currently generating about -0.07 per unit of risk. If you would invest  1,364  in Guild Holdings Co on December 29, 2024 and sell it today you would lose (2.00) from holding Guild Holdings Co or give up 0.15% of portfolio value over 90 days.

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

Guild Holdings Co  vs.  Velocity Financial Llc

Guild Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guild Holdings Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Guild Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Velocity Financial Llc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Velocity Financial Llc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Velocity Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Guild Holdings and Velocity Financial

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

The idea behind Guild Holdings Co and Velocity Financial Llc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.