Correlation Between Rocket Companies and UWM Holdings

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

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

Diversification Opportunities for Rocket Companies and UWM Holdings

0.94

Correlation Coefficient

Rocket Companies  UWM Holdings

Almost no diversification

The 3 months correlation between Rocket and UWM is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Companies 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 Rocket Companies 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 Rocket Companies 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 Rocket Companies i.e., Rocket Companies and UWM Holdings go up and down completely randomly.

Pair Corralation between Rocket Companies and UWM Holdings

Considering the 90-day investment horizon Rocket Companies is expected to generate 1.06 times more return on investment than UWM Holdings. However, Rocket Companies is 1.06 times more volatile than UWM Holdings Corp. It trades about 0.05 of its potential returns per unit of risk. UWM Holdings Corp is currently generating about 0.05 per unit of risk. If you would invest  849.00  in Rocket Companies on August 31, 2024 and sell it today you would earn a total of  585.00  from holding Rocket Companies or generate 68.9% return on investment over 90 days.

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

Rocket Companies  vs.  UWM Holdings Corp

Rocket Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocket Companies 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 forward-looking signals remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 Rocket Companies and UWM Holdings

The main advantage of trading using opposite Rocket Companies and UWM Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Companies 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 Rocket Companies 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.

Check out your portfolio center.

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.