Correlation Between Loandepot and UWM Holdings

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

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

Diversification Opportunities for Loandepot and UWM Holdings

0.52

Correlation Coefficient

Loandepot  UWM Holdings

Very weak diversification

The 3 months correlation between Loandepot and UWM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Loandepot and UWM Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UWM Holdings Corp 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 UWM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UWM Holdings Corp has no effect on the direction of Loandepot i.e., Loandepot and UWM Holdings go up and down completely randomly.

Pair Corralation between Loandepot and UWM Holdings

Considering the 90-day investment horizon Loandepot is expected to generate 1.57 times more return on investment than UWM Holdings. However, Loandepot is 1.57 times more volatile than UWM Holdings Corp. It trades about 0.04 of its potential returns per unit of risk. UWM Holdings Corp is currently generating about 0.03 per unit of risk. If you would invest  175.00  in Loandepot on August 31, 2024 and sell it today you would earn a total of  55.00  from holding Loandepot or generate 31.43% return on investment over 90 days.

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

Loandepot  vs.  UWM Holdings 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 fairly strong fundamental indicators, Loandepot is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

UWM Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UWM Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Loandepot and UWM Holdings

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

The idea behind Loandepot and UWM Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.