Correlation Between Loandepot and Velocity Financial

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

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

Diversification Opportunities for Loandepot and Velocity Financial

0.25

Correlation Coefficient

Loandepot  Velocity Financial

Modest diversification

The 3 months correlation between Loandepot and Velocity is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Loandepot 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 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 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 Loandepot i.e., Loandepot and Velocity Financial go up and down completely randomly.

Pair Corralation between Loandepot and Velocity Financial

Considering the 90-day investment horizon Loandepot is expected to under-perform the Velocity Financial. In addition to that, Loandepot is 2.43 times more volatile than Velocity Financial Llc. It trades about -0.23 of its total potential returns per unit of risk. Velocity Financial Llc is currently generating about -0.08 per unit of volatility. If you would invest  1,997  in Velocity Financial Llc on December 29, 2024 and sell it today you would lose (142.00) from holding Velocity Financial Llc or give up 7.11% of portfolio value over 90 days.

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

Loandepot  vs.  Velocity Financial Llc

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.

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 latest unsteady performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Loandepot and Velocity Financial

The main advantage of trading using opposite Loandepot and Velocity Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loandepot 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 Loandepot 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.