Correlation Between Loandepot and Timbercreek Financial

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

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

Diversification Opportunities for Loandepot and Timbercreek Financial

0.41

Correlation Coefficient

Loandepot  Timbercreek Financial

Very weak diversification

The 3 months correlation between Loandepot and Timbercreek is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Loandepot and Timbercreek Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timbercreek Financial and Loandepot 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 Loandepot are associated (or correlated) with Timbercreek Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timbercreek Financial has no effect on the direction of Loandepot i.e., Loandepot and Timbercreek Financial go up and down completely randomly.

Pair Corralation between Loandepot and Timbercreek Financial

Considering the 90-day investment horizon Loandepot is expected to under-perform the Timbercreek Financial. In addition to that, Loandepot is 1.6 times more volatile than Timbercreek Financial Corp. It trades about -0.26 of its total potential returns per unit of risk. Timbercreek Financial Corp is currently generating about -0.12 per unit of volatility. If you would invest  516.00  in Timbercreek Financial Corp on October 8, 2024 and sell it today you would lose (25.00) from holding Timbercreek Financial Corp or give up 4.84% of portfolio value over 90 days.

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

Loandepot  vs.  Timbercreek Financial Corp

Loandepot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Timbercreek Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timbercreek Financial Corp 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 basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Loandepot and Timbercreek Financial

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

The idea behind Loandepot and Timbercreek Financial Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.