Correlation Between Loandepot and Walker Dunlop

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

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

Diversification Opportunities for Loandepot and Walker Dunlop

0.93

Correlation Coefficient

Loandepot  Walker Dunlop

Almost no diversification

The 3 months correlation between Loandepot and Walker is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Loandepot and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop 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 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 Loandepot i.e., Loandepot and Walker Dunlop go up and down completely randomly.

Pair Corralation between Loandepot and Walker Dunlop

Considering the 90-day investment horizon Loandepot is expected to under-perform the Walker Dunlop. In addition to that, Loandepot is 1.45 times more volatile than Walker Dunlop. It trades about -0.16 of its total potential returns per unit of risk. Walker Dunlop is currently generating about -0.19 per unit of volatility. If you would invest  10,934  in Walker Dunlop on December 2, 2024 and sell it today you would lose (2,367) from holding Walker Dunlop or give up 21.65% of portfolio value over 90 days.

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

Loandepot  vs.  Walker Dunlop

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.

Walker Dunlop

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Loandepot and Walker Dunlop

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

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.